How can you know if your fulfillment operations are on track when you’re not practicing inventory control?
That’s one of the most critical warehouse-related questions any eCommerce business should ask itself or its fulfillment partner. If you’re not measuring and verifying inventory or are failing to use it correctly, you’re putting your company at significant risk. Not understanding your inventory makes it harder to keep things in stock or could cause you to spend all your revenue on product levels you could never sell.
To tackle these concerns, companies turn to inventory control systems. These tools are designed to improve inventory understanding and suggest ways you can improve operations. In this post, we’ll investigate the basis of inventory controls, what you can use to accomplish it, and how to maximize your efforts.
What does inventory control mean?
In the logistics space, inventory control focuses on how you handle the inventory in your warehouse. It’s a specific section of broader inventory management policies — learn more about inventory management here — that focuses on how you control inventory in your control. Some companies call this stock control to help reinforce the focus on the goods you have in stock. These practices help you understand what you have, where it is, and when you need to reorder products.
When thinking in revenue terms, inventory control is about minimizing storage, labor, packaging, and restocking costs to keep margins and customer satisfaction high.
Standard features and activities of inventory control include:
- Setting up your WMS and its inventory modules or features
- Integrating barcode scanners or RFID options with your WMS
- Adding smartphones and apps to inventory systems for pickers
- The steps your team takes to create an inventory list and count
- Reports on product locations, quantities, and other information
- Creating minimum stock levels and reorder points
- Tracking and management for creating kits and bundles
- Practices for updating product and order information
Why is inventory control important?
Getting inventory control right means you have the proper amount of products flowing into your warehouse and filling orders. You’ll also be tracking inventory data to learn if products are generating enough revenue for your business or if you should be reallocating your capital investments.
Inventory control plays a part in your overall warehouse management too. For this, it helps with checks to avoid theft and shrinkage, scans to prevent mis-picks, and storage practices to limit harm or spoilage.
Every mistake in a warehouse eats into your revenue. Unfortunately, many mistakes and threats create compounding issues. Ordering too much slow-moving inventory not only eats up capital but also increases your storage costs over time. Sending out the wrong orders creates return expenses and ties up inventory unnecessarily. Running out of stock limits your sales capabilities and can harm customer lifetime values. Poor forecasting can cause these issues if your inventory data isn’t reliable.
Mitigate those risks by employing the right tools and policies for inventory control.
What do companies use for inventory control?
Many eCommerce companies change inventory control tools as they grow.
Most will start with a pen-and-paper ledger or stock book to manually track inventory. It’s feasible if you have just a few products and can quickly count your inventory. However, it runs the risk of errors because you track goods manually, and the counting process is easy to interrupt.
As companies move to their first warehouses, they’ll often upgrade to stock cards. While these were once physical cards, now most are digitally created in programs like Excel. Stock cards track your inventory level of a product, its unit price, and the value of your entire stock. Whenever an item is removed or added to your total inventory, someone should update the card.
Most have areas to write more notes for each change. These are critical for tracking inventory use, whether it is a sale, inventory is damaged, marketing-related, or more. Without consistent, high-quality updates, stock cards lose value and make it harder for you to track inventory revenue accurately.
As this example demonstrates, stock cards are handy for avoiding spoilage in FIFO (first-in, first-on) situations.
Other growing eCommerce companies may turn to larger or more sophisticated spreadsheets in Excel. Spreadsheets can track a wide range of data points, from SKU and barcodes to quantities, costs, and reorder levels. Excel’s programming and function support enable you to do things like creating alerts and flags when inventory drops below a certain level. Those reorder flags help users realize that your business needs to contact your supplier and place a restock order.
A core reason companies upgrade to such spreadsheets is that many barcode scanners come with software that auto-populates information in Excel. Some programs even generate an online database of information as the scanner scans items. You can import the most recent information through the Excel “Data” section, ensuring that you’ve got the most relevant information at your fingertips to make a business decision. The downside is that comprehensive updates of this type are only available after the end of a shift or after you’ve scanned and audited your inventory.
Suppose you use Excel to support your financial record keeping. In that case, it’s easy to automatically update sheets with sales and quantity data to help you project and audit expense and revenue reports.
Starter stock software
The next stage of growth for eCommerce companies is the use of basic stock and inventory software tools. Early-stage software usually includes support for a broad range of barcode scanners and point-of-sale tools. However, you may need integration tools or third-party apps to connect these systems with your existing eCommerce order management platform.
The benefit of shifting to programs dedicated to inventory control is their automation and accuracy. By integrating with your tools and other platforms, these inventory systems offer real-time data and automatic updates. Many also provide both immediate notifications and alerts at the end of the day. This can help you reorder stock during business hours, avoiding the need to wait until the next day to place your order.
Advanced functionality can also help you identify product turnover rates. That data can be used to calculate how much you spend on storing each SKU or tracking losses related to expiration. That way, you can generate reports on the actual revenue and margins from each SKU and identify best- and worst-performing inventory.
Integrated software and partners
One of the final evolutions of inventory control systems is an advanced WMS or ERP. These systems have specific tools for inventory control and can scale to meet the demands of global supply chains. Large systems not only integrate with your other tools, like an eCommerce sales platform, but they bring together data from multiple sources to optimize your efforts.
At this level, systems can make suggestions for how you layout your warehouse to optimize pick-and-pack efforts. You can use historical data for demand forecasting and inventory planning analytics. The software will help you buy the proper inventory amounts to avoid stockouts while minimizing your storage costs. They can work across multiple warehouses and even help you route orders to the correct location to use existing inventory while minimizing shipping and fulfillment costs.
When you reach this growth stage, it might be time to outsource your fulfillment to a 3PL. When this occurs, they should provide some of this functionality and integrate it with your existing technology stack. A fulfillment provider would then update your inventory levels and provide analytics support to keep your business thriving. Many companies find this type of partnership much more affordable than scaling their fulfillment operations and owning their warehouses.
10 best practices
To help you think about inventory control, we’ve put together this list of ten best practices and policies. They’ll help you avoid some of the more significant concerns while also providing reasonable justification for upgrading platforms or changing policies to protect your operations.
- Shift to perpetual counting as soon as you can. Periodic inventory counts can miss errors or warning signs and increase the time it takes you to respond to an issue. Periodic counts are also more susceptible to fraud and shrinkage. Perpetual counting can keep you accurate and give correct data to your team whenever they need it.
- When possible, have separate teams be responsible for stocking shelves and picking orders. This helps minimize shrinkage risks. If you’re a small organization, your finance team should not be involved in either warehouse practice to avoid these risks.
- Audit every practice and tool. Work with IT to ensure that data moves freely between systems and remains accurate. Periodically, perform manual inventory verifications as well to ensure the software is capturing stock levels accurately.
- Adopt scanning at multiple points. Look for inventory control software that allows you to scan goods taken off a truck, put off a shelf, picked for an order, and packed into boxes. Barcodes help eliminate manual errors and keep inventory numbers accurate. Multiple scans ensure that orders go out correctly and make it easy to scale your operations across multiple locations.
- Train your team on inventory control procedures. So, say your goods are perishable, so you follow FIFO. Staff needs to learn how to safely store goods, use the correct inventory to fill an order, and record their interactions with stock.
- When using advanced fulfillment features like cross-docking, create clear processes for tracking inventory at each step of inbound, adding to inventory, and fulfillment use.
- Don’t neglect the equipment you need for inventory control. Have backups for frequently used goods, performance maintenance, and upgrade ahead of obsolescence.
- Regularly review your stock levels and orders under the inventory control platforms. That’ll help your company maintain proper restock levels and can improve analytics accuracy.
- Create and manage SKUs within your inventory control tools. Generally, this will be a default setup in your software. Where you’ll need to dig in is when you create kits. That’s because these need their own SKUs and to properly reduce other inventory levels as you build and scan in each kit.
- When you add new products to your eCommerce store, fill in all product details in your inventory control tools.
What if you need help with inventory control?
What if your company isn’t sure about managing inventory? Have operations grown too large for you to feel like you’ve got inventory under control? That’s the right time to speak with a partner like Red Stag Fulfillment.
Our experts will help you understand the systems and tools available that might solve your concerns. If you’re looking to outsource and offer products we specialize in (bulky, heavy goods), then we’ll discuss how Red Stag can help. If your products aren’t the right fit, we’ll give you a questionnaire to bring to other 3PLs and point you in the direction of some.
Inventory control is challenging, especially as you expand. You’re going to face challenges and have questions. One of the best things your company can do is find a partner who’ll listen, understand, and answer when you need it.