December 7, 2022
Alipio Umiten IV

What Is Inventory Control? | Inventory Control Definition

Are you frustrated by the amount of inventory your business has on hand? You’re not alone. Inventory control is a critical aspect of any business, big or small—but what is inventory control? How does it work, and why should we care about controlling our inventories? Read on to find out!

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Inventory Control

Inventory control is the process of managing and regulating inventory levels within a business. It is used to monitor stock levels, track inventory movements, lessen restaurant expenses as well as operating expenses, and ensure that goods are available when needed.

Several different methods can be used to control inventory, including just-in-time (JIT) inventory management, Economic Order Quantity (EOQ) models, and ABC analysis. The best method for a given organization will depend on factors such as the types of goods being managed, the frequency of demand, and the storage capacity available.

An important part of effective inventory control is maintaining accurate records. This includes tracking what goods are in stock, where they are located, and when they need to be replenished. Accurate records are essential for ensuring that stock levels are maintained at the optimum level and avoiding supply chain management disruptions.

Why Is Inventory Control Important?

Inventory control is important for businesses because it ensures that the right products are in stock at the right time. This helps avoid stockouts, which disrupt operations and lead to lost sales. Additionally, inventory control helps minimize the cost of inventory by ensuring that only the necessary amount of stock is kept on hand.

Inventory control is typically managed through the use of an inventory management system. This system helps businesses to track their inventory levels, reorder products as needed, and keep track of product expiration dates. Additionally, an inventory management system helps businesses set minimum and maximum stock levels so they can always have the products they need on hand without overstocking.

How Does an Inventory Control System Work?

Inventory control systems are used to track inventory levels, reorder points, and supplier information. They help businesses keep inventory tracking and prevent stockouts.

When using an inventory control system, businesses need to input data about their products, including product names, descriptions, prices, and each restaurant KPI. This data can be entered manually or imported from another database.

Once the product data has been entered, the inventory control system will track the movement of these products through UPC barcodes or RFID tags. These barcodes or tags will be attached to the products and scanned each time they are moved. The inventory control system will then use this information to update its records and provide managers with real-time data about the location and status of their products.

When appropriately used, inventory control systems can save businesses money by reducing the need for overtime hours, expedited shipping costs, and lost sales.

What Is the Purpose of Inventory Control?

The purpose of inventory control is to ensure that the company has enough stock to meet customer demand while avoiding excess inventory that ties up working capital and leads to storage costs.

Now that you know the importance of inventory management, let’s look at how you can effectively control your inventory levels.

How to Control Inventory

Controlling inventory is vital to any business, but it is especially challenging for small businesses. Without a clear understanding of what inventory is on hand and what needs to be ordered, it’s easy to end up with too much or too little stock. This leads to inefficiencies and lost sales.

There are a few key things to keep in mind when controlling inventory:

  1. Understand your inventory turnover. This is the number of times your inventory is sold and replaced over time. A higher turnover rate means you’re selling through your stock more quickly, which is generally a good thing. However, if your turnover rate is too high, it could mean you’re not holding enough inventory on hand to meet customer demand.
  2. Know your lead time. This is the time it takes to receive new inventory after an order is placed. If you have a long lead time, it’s important to plan ahead, so you don’t run out of stock.
  3. Keep an accurate count of your inventory. This may seem like a no-brainer, but it’s important to have a system in place to track what comes in and goes out of your inventory. This will help you avoid overstocking or understocking.
  4. Use technology to your advantage. There are many software programs available that can help you track and manage your inventory such as BlueCart and BinWise restaurant and beverage inventory management system. Taking advantage of these tools makes the process easier and more efficient–especially for keeping track of restaurant data analytics.
  5. Have a plan for inventory management. Having a well-thought-out plan is key to controlling inventory. This plan should include how often you’ll count and update your inventory, how orders will be placed, and who will be responsible for managing it all.

By following these tips, you can get a better handle on your inventory and avoid the potential problems that come with too much or too little stock.

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What Is the Reorder Level In Inventory Control?

The reorder level is the point at which you need to order more products to keep your inventory levels up. You can calculate it by taking the average demand for the product and multiplying it by the lead time (the amount of time it takes to get more of the product).

You can also add a safety stock, an additional buffer of inventory that is kept on hand in case of unexpected spikes in demand or delays in receiving new inventory. This ensures enough inventory is on hand to serve your ideal customer profile without incurring high holding costs.

The formula for calculating reorder level is as follows:

Reorder Level = Average Demand × Lead Time + Safety Stock

For example, if your average demand is ten units per day and your lead time is three days, your reorder level would be 10 x 3 + safety stock. If you add a safety stock of 5 units, your reorder level would be 35 units.

If you don’t have enough inventory on hand when you reach your reorder level, you may experience a stockout. To avoid this, it’s important to keep track of your reorder level and make sure you have enough inventory on hand to meet demand.

How Can Poor Inventory Control Affect Profits?

Poor inventory control affects profits by leading to stockouts. When a company doesn’t have enough of a product in stock to meet customer demand, it can lose sales and potentially damage its reputation.

Additionally, companies may miss out on opportunities to sell products at full price if they don’t have enough inventory on hand. Poor inventory management also leads to excess inventory, which ties up working capital and can be costly to store and manage.

Another way that poor inventory control can impact profits is through increased costs associated with rush orders and expedited shipping. If a company regularly has to place rush orders because it doesn’t have enough inventory, those additional costs will eat into profits. Inefficient inventory management also adds to labor costs, as employees may have to spend extra time tracking down products or dealing with stockouts.

Therefore, investing in effective inventory management practices is important for businesses to avoid these costly consequences.

Frequently Asked Questions About Inventory Control

Inventory control is one of the most vital aspects of keeping a business in motion. With this said, it's not surprising if you have a lot of questions about it. So, we hope the following section is helpful!

What Inventory Means?

Inventory refers to the goods and materials a business uses in its operations. It includes finished goods, raw materials, components, and work-in-progress (WIP) items.

What Is ABC Inventory Control?

ABC inventory control is a method of managing inventory that classifies items based on their importance. Items in the A category are considered the most important and are given the highest priority when it comes to stock levels, while items in the C category are considered less important and given lower priority.

What Is the JIT System?

The JIT system is an inventory management technique in which businesses only produce or order the amount of inventory just in time for when they are needed, rather than stockpiling inventory. This helps reduce waste, decrease the overall restaurant food cost, and increase efficiency by ensuring that resources are only used when necessary.

What Is an Inventory Cycle Count?

An inventory cycle count is an inventory management procedure in which the physical stock of goods is counted periodically to match inventory records. This ensures that inventory levels are accurate and up-to-date.

What Is Good Inventory Management?

Proper inventory management skills are all about keeping track of your inventory levels. It also required you to have sufficient stock on hand. If you carry a lot of inventory at once, this can be quite the challenge.

Time to Take Control of Your Inventory

Inventory control can make or break your business, so we hope that by learning more about it, you’ll be able to start off on the right foot. Remember, it will take time and effort to see results, but eventually, you will have a better understanding of what is selling and what isn’t.

Are you ready to take back control of your inventory levels?