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Get
Ahead of Your Competitors with Strategic Inventory Control
Many businesses that have neglected the implementation of proper inventory control
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11.11.05
Get Ahead Of Your Competitors With Strategic Inventory Control
 By
Ken Town
Many businesses that have neglected the implementation of proper inventory control
processes fail to realize that this may have adverse effects on their company
performance.
This is especially true for many small business owners, for whom inventory control
simply means juggling manual records of inventory coming and going. However, what
they fail to see is that these obsolete practices can potentially affect the ability
of their businesses to compete.
Without good inventory controls, business owners will not be able to implement
the LIFO (Last In, First Out) or FIFO (First In, First Out) systems. Unless a
physical inventory check is done, there is no way of knowing at the click of a
button the quantities and product types which are older than the average inventory
age. Implementing LIFO and FIFO requires this information as a prerequisite.
How does this affect you? Well, if your inventory prices fluctuate, you will not
be able to accurately determine the actual cost of the items sold if you can't
tell whether it was purchased with the old price or the new. This will affect
your profitability. Another major problem area is the depreciation of your inventory.
Items which have been in stock for too long will depreciate in value concurrent
with their depreciating shelf life. If have ltoo much old stock in inventory,
you may end up losing money just because of depreciation alone.
Also, without good inventory control, more time and money will have to be spent
on hiring people to manage inventory. Some of these responsibilities include calculating
what is out of stock, and manual inventory tracking.
However, if you have an inventory management system in place, your company will
have a leg up on your competition. You will have the capability to know, within
moments, the age of any item in your inventory. With this information you can
therefore determine which item to push out first, if you follow the FIFO system.
This leads to increased profitability through reduced depreciation costs.
Faster access to inventory information means the ability to respond to your customers
fast. This is especially important if you are in a role that requires you to deliver
products with a fast turnaround. In addition, you can reorder products that are
out of stock with greater responsiveness, and your stock unavailability rate will
also be reduced. This increases customer satisfaction levels as they now know
that you are less likely to make them wait for products on order.
One of the greatest benefits of an inventory management system is its cost-effectiveness
over the long term. Your initial investment into this system will help you decrease
your spending on manpower costs. There will be less inventory checks, less paperwork
and less manual tracking to be done, as all of these are already taken care by
the system.
So, efficient inventory control means that you are able to respond faster to customer
needs, increase internal productivity, have better recording clarity and accountability,
reduce costs and ultimately increase profits.
About the Author:
Ken Town is VP Research and Technology at Invendia,
a leading provider of Vendor
Managed Inventory (VMI) and Web-based
Inventory solutions. |
