Stock control and inventory
Within those systems, two main types of inventory management systems — barcode systems and radio frequency identification RFID systems — used to support the overall inventory control process:. Inventory control systems help you track inventory and provide you with the data you need to control and manage it. No matter which type of inventory control system you choose, make sure that it includes a system for identifying inventory items and their information including barcode labels or asset tags; hardware tools for scanning barcode labels or RFID tags; a central database for all inventory in addition to the ability to analyze data, generate reports, and forecast demand; and processes for labeling, documenting, and reporting inventory along with a proven inventory methodology like just-in-time, ABC analysis, first-in, or first out FIFO , or last-in-first-out LIFO.
Read on to learn more about the four types of inventory control systems. When you use a perpetual inventory system , it continually updates inventory records and accounts for additions and subtractions when inventory items are received, sold from stock, moved from one location to another, picked from inventory, and scrapped. Some organizations prefer perpetual inventory systems because they deliver up-to-date inventory information and better handle minimal physical inventory counts. Perpetual inventory systems also are preferred for tracking inventory because they deliver accurate results on a continual basis when managed properly.
This type of inventory control system works best when used in conjunction with a database of inventory quantities and bin locations updated in real time by warehouse workers using barcode scanners. There are some challenges associated with perpetual inventory systems.
First, these systems cannot be maintained manually and require specialized equipment and software that results in a higher cost of implementation, especially for businesses with multiple locations or warehouses. Periodic maintenance and upgrades are necessary for periodic inventory systems, which also can become costly. Another challenge of using a perpetual inventory system is that recorded inventory may not reflect actual inventory as time goes by because they do not use regular physical inventory counts.
The result is that errors, stolen items, and improperly scanned items impact the recorded inventory records and cause them not to match actual inventory counts. Periodic inventory systems do not track inventory on a daily basis; rather, they allow organizations to know the beginning and ending inventory levels during a certain period of time. These types of inventory control systems track inventory using physical inventory counts. When physical inventory is complete, the balance in the purchases account shifts into the inventory account and is adjusted to match the cost of the ending inventory.
There are a few disadvantages of using a periodic inventory system. First, when physical inventory counts are being completed, normal business activities nearly become suspended. As a result, workers may hurry through their physical counts because of time constraints. Errors and fraud may be more prevalent when you implement a periodic inventory system because there is no continuous control over inventory.
It also becomes more difficult to identify where discrepancies in inventory counts occur when using a periodic inventory control system because so much time passes between counts. The amount of labor that is required for periodic inventory control systems make them better suited to smaller businesses.
Inventory management systems using barcode technology are more accurate and efficient than those using manual processes. When used as part of an overall inventory control system, barcode systems update inventory levels automatically when workers scan them with a barcode scanner or mobile device.
What Is Inventory Control Management?
The benefits of using barcoding in your inventory management processes are numerous and include:. Radio frequency identification RFID inventory systems use active and passive technology to manage inventory movements. Active RFID technology uses fixed tag readers throughout the warehouse; RFID tags pass the reader, and the movement is recorded in the inventory management software. For this reason, active systems work best for organizations that require real-time inventory tracking or where inventory security has been an issue. Passive RFID technology, on the other hand, requires the use of handheld readers to monitor inventory movement.
When a tag is read, the data is recorded by the inventory management software. RFID technology has a reading range of approximately 40 feet with passive technology and feet with active technology. If your stock levels are limited by capital, this will help you to plan expenditure on new and replacement stock. Deciding how much stock to keep depends on the size and nature of your business, and the type of stock involved. If you are short of space, you may be able to buy stock in bulk and then pay a fee to your supplier to store it, calling it off as and when needed.
Keeping little or no stock and negotiating with suppliers to deliver stock as you need it. This might suit your business if it's in a fast-moving environment where products develop rapidly, the stock is expensive to buy and store, the items are perishable or replenishing stock is quick and easy.
This might suit your business if sales are difficult to predict and it is hard to pin down how much stock you need and when , you can store plenty of stock cheaply, the components or materials you buy are unlikely to go through rapid developments or they take a long time to re-order. Keeping stocks of unfinished goods can be a useful way to protect production if there are problems down the line with other supplies.
There are several methods for controlling stock, all designed to provide an efficient system for deciding what, when and how much to order. You may opt for one method or a mixture of two or more if you have various types of stock. For further information, see the page in this guide on types of stock.
Items are delivered when they are needed and used immediately. There is a risk of running out of stock, so you need to be confident that your suppliers can deliver on demand. These methods can be used alongside other processes to refine the stock control system. Re-order lead time - allows for the time between placing an order and receiving it.
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- Types of stock?
Economic Order Quantity EOQ - a standard formula used to arrive at a balance between holding too much or too little stock. It's quite a complex calculation, so you may find it easier to use stock control software. Batch control - managing the production of goods in batches. You need to make sure that you have the right number of components to cover your needs until the next batch. If your needs are predictable, you may order a fixed quantity of stock every time you place an order, or order at a fixed interval - say every week or month.
In effect, you're placing a standing order, so you need to keep the quantities and prices under review. First in, first out - a system to ensure that perishable stock is used efficiently so that it doesn't deteriorate. Stock is identified by date received and moves on through each stage of production in strict order.
Stock control and inventory
Stocktaking involves making an inventory , or list, of stock, and noting its location and value. It's often an annual exercise - a kind of audit to work out the value of the stock as part of the accounting process. Codes , including barcodes, can make the whole process much easier but it can still be quite time-consuming. Checking stock more frequently - a rolling inventory - avoids a massive annual exercise, but demands constant attention throughout the year. Radio Frequency Identification RFID tagging using handheld readers can offer a simple and efficient way to maintain a continuous check on inventory.
See the page in this guide on using RFID for inventory control, stock security and quality management. The simplest manual system is the stock book , which suits small businesses with few stock items. It enables you to keep a log of stock received and stock issued.
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It can be used alongside a simple re-order system. For example, the two-bin system works by having two containers of stock items. When one is empty, it's time to start using the second bin and order more stock to fill up the empty one. Stock cards are used for more complex systems.
Each type of stock has an associated card, with information such as:. More sophisticated manual systems incorporate coding to classify items. Codes might indicate the value of the stock, its location and which batch it is from, which is useful for quality control. Computerised stock control systems run on similar principles to manual ones, but are more flexible and information is easier to retrieve. You can quickly get a stock valuation or find out how well a particular item of stock is moving.
A computerised system is a good option for businesses dealing with many different types of stock. Other useful features include:. The system will only be as good as the data put into it. Run a thorough inventory before it goes "live" to ensure accurate figures. It's a good idea to run the previous system alongside the new one for a while, giving you a back-up and enabling you to check the new system and sort out any problems. There are many software systems available.
Talk to others in your line of business about the software they use, or contact your trade association for advice. Avoid choosing software that's too complicated for your needs as it will be a waste of time and money. Radio Frequency Identification RFID allows a business to identify individual products and components, and to track them throughout the supply chain from production to point-of-sale. An RFID tag is a tiny microchip, plus a small aerial, which can contain a range of digital information about the particular item.
Tags are encapsulated in plastic, paper or similar material, and fixed to the product or its packaging, to a pallet or container, or even to a van or delivery truck. The tag is interrogated by an RFID reader which transmits and receives radio signals to and from the tag. Readers can range in size from a hand-held device to a "portal" through which several tagged devices can be passed at once, e. The information that the reader collects is collated and processed using special computer software. Readers can be placed at different positions within a factory or warehouse to show when goods are moved, providing continuous inventory control.
Using RFID tagging for stock control offers several advantages over other methods such as barcodes:. The costs associated with RFID tagging have fallen over recent years, and continue to do so, to bring the process within the reach of more and more businesses. The benefits of more efficient stock control and improved security make it particularly attractive to retailers, wholesalers or distributors who stock a wide range of items, and to manufacturers who produce volume runs of products for different customers. Keeping stock secure depends on knowing what you have, where it is located and how much it is worth - so good records are essential.
Stock that is portable, does not feature the business' logo, or is easy to sell on, is at particular risk. A thief coming in from outside is an obvious threat. Check the security around your premises to keep the risk to a minimum. In a store, thieves may steal in groups - some providing a distraction while others take goods. Teach your staff to be alert and to recognise behaviour like this. Set up a clear policy and make sure staff are trained in dealing with thieves.
Offering to help a customer if you are suspicious will often prevent a theft. Avoid using confrontational words like "steal" if you do have to approach a suspected thief, and avoid getting into a dangerous situation. Quality control is a vital aspect of stock control - especially as it may affect the safety of customers or the quality of the finished product. Efficient stock control should incorporate stock tracking and batch tracking. This means being able to trace a particular item backwards or forwards from source to finished product, and identifying the other items in the batch.
Goods should be checked systematically for quality, faults identified and the affected batch weeded out. This will allow you to raise any problems with your supplier and at the same time demonstrate the safety and quality of your product.
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