What Is Inventory Control System? What Are The Type Of That?
Inventor Control systems are a crucial part of a business. They work to reduce the blockage of financial resources. Effective inventory control systems help companies optimize their inventory levels, reduce waste, and improve operational efficiency.
Whether it is a small e-Commerce store or a large retail store with multiple locations, inventory control systems are inevitably crucial for businesses. Businesses can reduce the risks of overstocking and stockouts by implementing proper systems of inventory control.
In this article, I have explained what inventory control system stands for, their different types, and their importance in business. Reading this article should be helpful if you are planning to learn about the same.
What Is Inventory Control System?
The inventory control system provides advanced inventory management through end-to-end visibility. The main benefit of it is streamlining supply chain operations across different locations. It also minimizes the necessity for manual labor for receiving, issuing, and delivering goods. It is a critical part of any eCommerce business. Businesses with the right inventory management can lower the cost of the sold goods, thereby increasing the profit margin.
We can also define this control system as a set of processes and technologies that help manage a company’s orders, inventory levels, and stock movements. It involves tracking the flow of goods and materials in and out of a company’s warehouse or storage facility to ensure that there is always enough inventory to meet customer demand while avoiding overstocking and excess inventory costs.
An inventory control protocol can help automate and streamline the already existing inventory management processes. You will always have the stock on hand, which, in return, will help fill orders instantly and increase your sales.
Although inventory control systems have been existing for a long time, they have evolved with time. They are not just merely spreadsheets. Currently, machine learning has been added to inventory systems creating automated inventory control systems. There are two main types of inventory control systems. You will find more about them in detail below –
1. Perpetual Inventory Control System
The tracking of inventory using the perpetual inventory control system is done in real-time. When a product is sold and its barcode is scanned, it is removed from the global database. Also, when a new product is received, it is scanned instantly and added to the inventory database. All the parts of the system are connected to the same database and information used for the perpetual inventory control system.
The benefit of a perpetual inventory system is that it offers a detailed description of inventory management. It has the caliber to offer accurate accounting of the inventory levels without needing manual inventory counts. When businesses have high sales volume and have different locations, it is highly necessary for them to have a perpetual inventory management system.
2. Periodic Inventory Control System
Compared to the perpetual control system, a periodic inventory system is managed by physical counts of products at certain intervals. When a business has a periodic inventory control system, they will not know how many products are there until they take a physical count of the products. Businesses will easily find out how this is a problem when it comes to filling new orders.
You had an accurate count of the products a week or a few days ago; however, when a customer orders to buy them, you have to count the goods in your inventory to check if it is available for sale.
Most importantly, manual counting of products and checking the inventory is more time intensive and requires extra manual labor. In order to update the inventory, businesses have to count each and every SKU. Large stores will find it difficult to use a periodic inventory system. Only smaller businesses with a minimal amount of inventory can profitably use periodic inventory management.
Importance Of Inventory Control System
Running a business property is more difficult than we realize. On the surface level, businesses have to keep their inventory stoked up so that they are always ready to fill out orders. However, the process has more complex aspects, including sales, shipping, receiving, and storing. That is where the inventory system comes into play and automates the process, offering you more time to focus on other parts of the business.
Here is why an inventory control system is important –
Perpetual Real-Time Inventory Levels
Inventory levels can be updated globally when a product is sold, purchased, returned, or manufactured. When a business has a real-time inventory, it can analyze inventory flow and set reorder points accordingly. This way, businesses can stockouts and excessive stocking. By managing the possibility of overstocking and stockouts, businesses can build better customer relationships.
One of the primary reasons for implementing an inventory control system is to reduce costs. By having an accurate inventory count, businesses can avoid overstocking or understocking, both of which can be costly. Overstocking can lead to increased holding and storage costs, as well as potential spoilage, obsolescence, or damage. Understocking can lead to stockouts, which can result in lost sales, decreased customer satisfaction, and missed opportunities.
Businesses can operate more smoothly and efficiently with the help of Inventory control systems. With accurate inventory counts, businesses can optimize their inventory levels, reorder quantities, and lead times. This will result in efficient use of storage space, fewer stock-outs, and more streamlined operations in terms of sales.
Improved Customer Service
Inventory control systems can help businesses improve their customer service. With accurate inventory counts, businesses can ensure that they have the products their customers need when they need them. This can help improve customer satisfaction, increase repeat business, and build brand loyalty.
Better Decision Making
Inventory control systems provide businesses with real-time data about their inventory levels, sales trends, and order history; currently, all businesses are about data. This data can help businesses make better-informed decisions about their inventory management. They will be aware of when to reorder products, which products to promote, and which products to phase out.
Reduce Manual Labor Inaccuracies
Physical inventory tracking can cause different errors, fraudulent activities, etc. however, if they have an inventory control system in place, it will take human errors and theft out of the picture.
e-Commerce stores need a proper inventory control system to help them run smoothly. They can help stock the right product at the right time and also reduce the chance of overstocking. Businesses can prevent backorders and keep customers happy.
I hope that this article was able to help you understand the importance of inventory systems for eCommerce platforms. However, if you have any additional queries, the comment box is the right place to put them in. we will keep in touch.