Store Inventory Control: Concepts, Methods, and Best Practices

In retail, poor inventory control can bring about the downfall of even the most promising business. It can lead to products going out of stock faster than you can imagine, resulting in buyers asking for products that "just sold out." This could mean a loss of customers, a dip in profits, or unsold inventory piling up in the backroom.

In this post, we'll learn about effective inventory control. We'll explore the key concepts, discuss methods like FIFO and ABC analysis, and share best practices that will keep your shelves stocked, your customers happy, and profits rolling in.

We'll also explore the importance of using modern technology for stock control, examining the role of barcode scanning and powerful ERP systems like EZ Process Pro.

Main Takeaways From This Article:

• Inventory control is crucial for retail businesses to maintain optimal stock levels, reduce costs, and enhance customer satisfaction.
• Popular inventory control methods like FIFO, perpetual inventory, ABC analysis, and JIT can help streamline operations.
• Technology, including barcode scanning and RFID, can significantly improve accuracy and efficiency.
• Best practices such as regular audits, real-time data analysis, and employee training are essential for effective inventory management.
• EZ Process Pro offers powerful tools to help furniture businesses automate inventory processes, reduce errors, and make data-driven decisions.

What Is Store Inventory Control?

Inventory control is the process of managing and monitoring stock levels to ensure that the right products are available at the right time. It involves tracking inventory movements, analyzing sales data, and making informed decisions about purchasing, storage, and sales. Effective inventory control helps businesses avoid stockouts, reduce excess inventory, and improve overall operational efficiency.

The Difference Between Inventory Control and Inventory Management

Although both inventory control and inventory management are key for retail store operations, they serve different functions in the supply chain ecosystem.

• Inventory control focuses on overseeing the stock levels and ensuring that goods are efficiently tracked as they move in and out of the warehouse or retail space. This includes managing the physical inventory, optimizing storage locations, and minimizing potential losses such as shrinkage.
• On the other hand, inventory management takes a broader approach, involving a strategic overview of inventory needs, supplier relationships, demand forecasting, and financial impacts. It aims to maintain the right balance of stock to meet customer demand without overstocking, which ties up capital, or understocking, which leads to lost sales.

So, while inventory control is about the 'here and now' of stock levels, inventory management optimizes a product's entire lifecycle, from the procurement of raw materials to sales.

Key Inventory Control Concepts

Understanding key inventory control concepts is crucial for retailers aiming to maintain efficient stock levels. In this section, we look at five such concepts.

1. Stock Levels: These refer to the optimal quantity of products to keep on hand. It's a balancing act: too much stock ties up capital and risks obsolescence, while too little can lead to stockouts and lost sales.
2. Stock Turnover Rate: This metric measures how quickly inventory is sold and replaced. A higher turnover rate indicates efficient inventory management.
3. Safety Stock: This is a buffer stock kept on hand to mitigate unexpected fluctuations in demand or supply. It helps prevent stockouts but increases holding costs.
4. Inventory Costs: These include various costs associated with holding, ordering, and carrying inventory, such as storage fees, insurance, and opportunity costs.
5. Lead Time: This is the time it takes to receive an order from a supplier. It's essential to consider lead time when planning inventory replenishment to avoid stockouts.

Popular Inventory Control Methods

Businesses employ various methods to effectively manage inventory. Here are some of the most common approaches:

FIFO (First In, First Out) Method

This method prioritizes selling the oldest inventory items first, ensuring that the oldest products in stock are the first ones to be sold or used.

This method is best for perishable goods or products with expiration dates, such as food, cosmetics, or pharmaceuticals. By using FIFO, businesses can minimize the risk of stock spoilage or expiration.

Perpetual Inventory System

This method focuses on real-time tracking of inventory levels through continuous updates. This system involves recording inventory transactions as they occur, such as purchases, sales, and returns.

This approach works well for businesses needing constant updates on stock, particularly those managing high-value or high-turnover items. It’s especially suited to retailers, wholesalers, and manufacturers who require precise inventory oversight.

ABC Analysis

In this method, inventory items are categorized based on their value and usage. Items are typically classified into three categories:

• A Items: High-value items that account for a significant portion of the total inventory value.
• B Items: Medium-value items that are less critical than A items but still important.
• C Items: Low-value items that have a minimal impact on the overall inventory value.

The ABC analysis is best for prioritizing inventory management efforts. By focusing on high-value (A) items, businesses can optimize their control strategies, such as implementing tighter controls, more frequent inventory counts, and advanced inventory management systems.

Just-In-Time (JIT) Inventory

JIT inventory is a strategy that minimizes inventory levels by producing or purchasing goods only as needed. It reduces holding costs and waste by ensuring that goods are procured or produced only when required.

The JIT approach is particularly effective for businesses that can reliably forecast demand and depend on their suppliers. It's important to note that JIT requires strong coordination and communication between suppliers and manufacturers to ensure timely delivery of materials.

Bulk Ordering

Ordering in bulk is basically buying large quantities of inventory to benefit from discounts, which can lower the cost per unit, particularly for items with consistent demand and long shelf lives. In the furniture industry, it is usually referred to as ordering or buying containers.

For items with predictable demand and extended shelf lives, bulk ordering is a cost-effective method. Retailers who sell non-perishable basics, like cleaning supplies, canned goods, or stationery, often benefit from this strategy.

Open-to-Buy (OTB)

OTB is a budgeting tool used by retailers to plan future inventory purchases and manage cash flow, helping them determine their spending capacity for inventory over a specific timeframe.

Especially valuable for seasonal businesses, OTB allows retailers to manage cash flow and inventory purchases effectively. This method is particularly beneficial for fashion retailers who need to plan around seasonal trends and promotions.

Last In, First Out (LIFO) Method

In this method, the newest inventory items are sold first. This means that the most recently purchased items are the first ones to be sold or used.

LIFO is best for non-perishable goods with stable costs. LIFO can be beneficial during periods of inflation as it can reduce taxable income. However, it's important to note that LIFO can lead to higher inventory valuation on the balance sheet.

Minimum Order Quantity (MOQ)

The MOQ refers to the smallest amount of a product that a supplier is willing to sell. It is typically set to cover production and shipping costs.

This approach helps businesses strike a balance between order costs and inventory holding expenses. By understanding MOQs, businesses can optimize their purchasing decisions and avoid placing small, less cost-effective orders. MOQs are particularly relevant for businesses that purchase from overseas suppliers or specialized manufacturers.

RFID and Barcoding Technologies

These technologies are used for tracking inventory through radio frequency identification tags and barcodes, allowing for real-time tracking and automated data capture.

These tracking technologies significantly improve accuracy and streamline operations, particularly for businesses handling large inventories or complex supply chains. They help reduce human error, enhance warehouse efficiency, and improve inventory visibility.

Best Practices for Store Inventory Control Systems

By implementing certain best practices, businesses can greatly improve their inventory control processes, reduce costs, and enhance customer satisfaction. Here are some of these best practices:

Utilize Automation for Inventory Control

Automation can transform inventory control by reducing manual tasks and improving accuracy. Implement tools for real-time stock adjustments that account for sales, returns, and damages automatically. Also, consider automated alerts for low stock, helping you stay proactive and avoid shortages.

Implement Barcode Scanning for Accuracy

Barcode scanning is a highly effective tool for improving inventory accuracy. Assign unique barcodes to each product and use barcode scanners to quickly capture data during receiving, picking, and shipping processes. Regularly calibrate your barcode scanners to ensure accurate readings.

Conduct Regular Inventory Audits

Regular inventory audits help maintain accurate records and identify discrepancies. Perform physical inventory counts at least annually and consider implementing cycle counting for high-value or frequently moving items. Investigate any discrepancies and take corrective actions to prevent future errors.

Use Real-Time Data for Better Decision-Making

Leverage real-time inventory data to make informed decisions. Implement a point-of-sale (POS) system that integrates with your inventory system to provide up-to-date information on stock levels, sales trends, and customer preferences. Use this data to optimize your inventory levels and purchasing decisions.

Optimize Reordering with Smart Technology

Enhance your reordering strategy by using smart technology solutions. Leverage inventory management software to set precise reorder points based on historical data and seasonal trends. A vendor-managed inventory (VMI) system can further improve efficiency by allowing vendors to monitor stock levels and replenish inventory when needed, reducing stockouts and lead times.

Train Employees on Inventory Control Protocols

Invest in training your employees on proper inventory control procedures. Provide clear guidelines on receiving, storing, picking, and shipping products. Conduct regular training sessions to keep employees up-to-date on best practices and address any questions or concerns.

Sync Inventory With E-commerce Platforms

Synchronize inventory levels between your physical store and online store to avoid stockouts and overselling. Use integration tools to automatically update inventory levels across all sales channels. Consider implementing a multi-channel inventory management system to manage inventory across multiple channels.

Implement an ERP System for Comprehensive Management

An Enterprise Resource Planning (ERP) system can streamline your entire business operations, including inventory control. It provides a centralized platform to manage inventory, purchasing, sales, and accounting. By integrating various business functions, an ERP system can improve efficiency, reduce costs, and enhance decision-making.

EZ Process Pro offers a powerful ERP solution designed specifically for retail businesses. Its advanced features, including real-time inventory tracking, barcode scanning, and automated purchasing, can help you take your inventory control to the next level.

Common Inventory Control System Challenges

Despite the best efforts, businesses often encounter several challenges in managing their inventory effectively. Here are some common issues:

• Inaccurate Stock Data and Human Errors: Manual data entry and physical counts can lead to inaccuracies. Human error, such as miscounting or incorrect data input, can significantly impact inventory records.
• Inefficient Reordering and Overstocking/Stockouts: Poor forecasting and slow response times can result in excess or insufficient inventory. Overstocking ties up capital and increases storage costs, while stockouts can lead to lost sales and customer dissatisfaction.
• Lack of Real-Time Visibility: Limited access to real-time inventory data can hinder decision-making. Without real-time insights, businesses may struggle to respond to changes in demand and supply.
• Managing Multi-Location Inventory: Tracking inventory across multiple stores or warehouses can be complex. Coordinating inventory levels and transfers between different locations requires careful planning and execution.
• Disconnected Systems for Physical and E-commerce Inventory: Misalignment between online and physical store stock can lead to customer dissatisfaction. Inconsistent inventory data can result in stockouts or overselling, damaging the customer experience.

Unique Challenges in Furniture Inventory Management

Managing inventory in the furniture industry presents unique obstacles due to the distinctive nature of its products. From storage demands to varying lead times, furniture retailers face several specific challenges in maintaining efficient inventory control:

• Bulky Storage Needs: Furniture items are large and require substantial storage space, which increases warehousing costs and complicates logistics. Managing these bulky items also demands extra attention in shipping and handling to prevent damage and ensure timely deliveries.
• Product Diversity: Furniture retailers typically offer a wide array of styles, materials, colors, and configurations. This extensive range complicates demand forecasting, often leading to either excess inventory or stock shortages, both of which can impact sales.
• Extended Lead Times: Furniture often has longer lead times due to intricate manufacturing processes, quality control, and international shipping requirements. Retailers need to carefully plan and forecast to avoid over-investing in inventory while ensuring availability.
• Seasonality and Shifting Preferences: Furniture sales are heavily influenced by seasonal trends and changing consumer preferences. Retailers must be agile, adapting inventory levels quickly with the help of an integrated inventory management system that delivers real-time insights for informed decision-making.

How EZ Process Pro Enhances Inventory Control for Furniture Retailers

Effective inventory control is essential for retailers to streamline operations, cut costs, and improve customer satisfaction. By implementing best practices and using advanced tools like real-time inventory systems, businesses can reduce stock issues and better align supply with demand.

EZ Process Pro is a powerful ERP solution designed specifically for furniture retailers. Its advanced features, such as real-time inventory tracking, barcode scanning, and automated purchasing, help take inventory control to new heights of efficiency.

By leveraging EZ Process Pro, furniture businesses can:

• Effectively improve their inventory control
• Reduce costs
• Improve customer satisfaction

Explore how EZ Process Pro can transform your furniture store operations with strategic benefits tailored to your needs.

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