Tips On Inventory Control

Supply and Demand

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Good Inventory Control

No business owner wants to have too much inventory or too little. But where is the happy medium and one that won’t hurt your pocketbook? Some business owners use the scientific method of days supply inventory, or the number of times you order inventory per year, divided by the number of days in the year will equal your days supply of inventory. No retailer should ever be over a thirty days supply of inventory using this calculation. Not all small business owners can determine this calculation especially if its a new business. Here are some easy ways to practice good inventory control:

Develop a purchasing plan — If you are in the retail business and expect to sell so many units per month, calculate how much those units will cost you per month. For example. if you plan to sell 30 units per month and the annual cost of those 30 units per month is $10,000, should you only order $10,000 worth of inventory? The answer here is no. You should have at least a 30 days over supply of inventory so it’s better to order more than you need unless you are in the food business. Food businesses need to determine how the restaurant business works regarding food on hand versus food sold versus items on the menu.

Fast-moving inventory — All retailers will have fast-moving inventory or favorite items that sell fast. Should you include this in your initial purchasing plan? You can answer this by the type of business you have. If you are a pizza shop and you will sell mostly pizzas, you will probably need to allow for more pizza crusts in your inventory than rolls for sandwiches. Consider your fast-moving items as their own inventory but do include them in restocking. When you do restock, find ways to volume shop to save dollars.

Restocking inventory — It’s hard for any new business owner to determine when to restock. It may take a little history behind you to get a good idea of when to restock. To help you make decisions on restocking, you must have a system in place that tells you when to reorder. The simplest of inventory control systems is the visibility count or the stub control method. In both of these, a manual inventory count is done on a regular basis or a stub count of items sold helps to determine what was sold and when to reorder. A better idea is to invest in a point of sale terminal which will give you a report on each item sold where you can use that report to help you make smart restocking decisions.