The Importance of Inventory Control

Managing inventory is like going to the dentist. It’s dreaded, postponed and causes anxiety attacks. But in the end both must be done.

Here are three simple facts about inventory:

1) You need it to create sales.
2) You need to know what you have so you know what to order.
3) You need to maintain it throughout the year because of shrinkage (broken pieces, samples sent, etc.)

Here are three simple results if you don’t manage your inventory:

1) Your employees are less productive because they are asked to count stock to determine ordering or fulfillment needs, constantly being interrupted.
2) There is no knowledge of what money is being spent on inventory.
3) Your balance sheet is incorrect.

Here are three simple ways to manage inventory.

1) Conduct a physical inventory. Either close your business for a day or two or come in over weekend and count everything you have. Involve the staff because you’ll need counters and data entry support.
2) Do not process an order until the information is entered into the system. Depending on the size of your inventory this could be done in two days. The hours are long and the work is tedious, but it’s imperative that it’s done and done correctly.
3) Maintain the inventory. Have a section that gets counted every week and rotated throughout the warehouse. This allows adjustments to be made more often so your inventory reports are correct.

Unmanaged inventory is like having a tooth that needs a root canal. For a long time you can get by without getting it fixed. But one day you wake up with a pounding tooth ache that needs immediate attention. You put your life on hold, get to the dentist and leave feeling much better. Inventory is no different. You can function without controls in place. However, you realize one day that you have no idea how much money you have sunk into inventory. It’s usually a day when cash flow is tight. You decide to get it under control, conduct an inventory count, put processes in place and become more efficient. And you and your company begin feeling much better.

Tackle it now and get it done!