Inventory control is a procedure employed by an organization to maximize its use of inventory. The primary goal of inventory control is to create maximum profits from the least amount of investment in inventory without impacting the level of consumer satisfaction. The fundamental facets of inventory control include supply chain management, consumer satisfaction, forecasting future demands, and financial flexibility (Jaber, 2009). Inventory often represent one of the biggest values in an organization’s balance sheet, and therefore, its effective control is critical in enhancing the indemnification of the continued and persistent success of a company’s manufacturing, distribution, and operational activities. The efficacy of a company’s inventory control and management is often evaluated by assessing the company’s capacity to lower its investment in inventory, attain maximum throughput, and meet its consumer service objectives while maintaining its operational costs (Jaber, 2009). Inventory control is usually complicated in practice and its implementation due to certain factors; they include the conflicting objectives across various distinct segments within an organization and the nature of inventory demand and supply.
Methods of Inventory Control/Inventory Control Systems
Minimum Stock Level
The minimum stock level inventory system is also referred to as the re-order level. As organizations attempt to attain efficiency, they ought to understand their ROL to familiarize themselves with the stock volume and the need to order for new stock; this may be accomplished through the use of quantitative procedures which enhance the proper management of inventory. The re-order level procedure allows the company to attain its optimal efficiency, thereby, increasing customer satisfaction and a high supply chain performance (Muller, 2011).
Delegate your assignment to our experts and they will do the rest.
Stock Review
The stock review method involves the regular review of a company’s stock. Here the company often takes a record of its stock at regular intervals, and during each review, an order for more stock is usually made to a pre-set level (Wee, 2011). The stock review procedure does not take into account the probability of an unforeseen quick sale, and it is based on the assumption that the sale and ordering of stock assumes a monotonous pattern.
Just-in-time
Just-in-time is an inventory control system which is designed to enhance efficiency and reduce significant wastes in the production procedure and minimize various inventory carrying expenses (Muller, 2011). The primary idea is to receive the inputs of production as required in the production process. To implement the inventory system, the organization ought to establish tight coordination with its respective suppliers. Ideally, an organization which employs the just-in-time inventory system has no on-hand delivery. The inventory system seeks to eliminate the costs incurred in holding inventory. A production process which employs the just-in-time system often receives the right quantity and type of material inputs at the specific time the inputs are required in the production process. Depending on the production process, this inventory system may need the delivery of multiple materials from suppliers per day and therefore, there ought to be a close professional relation amid the supplier and the company and close geographic proximity with the company's suppliers (Muller, 2011).
Economic Order Quantity
EOQ is often useful in instances where a particular good’s demand is constant throughout the year, and every new order is fully dispatched when the stock reaches zero. For every order placed, there is often a fixed cost regardless of the quantity of the ordered units. There is also an inflexible cost for every unit held in the warehouse or storage; this fixed cost is often referred to as the holding cost. The EOQ inventory system often allows companies to schedule the replenishment of inventory on a timely basis, for instance, quarterly, monthly, or yearly. Organizations often incur zero or minimal storage costs within their warehouses. The EOQ inventory system is usually aimed at minimizing the overall aggregate costs of inventory management (Muller, 2011).
Duties of a Purchasing and Inventory Control Manager
A purchasing and inventory control manager is responsible for various duties. First, the manager is often tasked with the duty of leading and managing the company's inventory control team of non-exempt and exempt employees to receive and record new stock as they come in. Secondly, a company's purchasing and inventory manager has the duty of evaluating the company's suppliers. Inventory managers often have the crucial responsibility of finding a supplier who will provide the organization with the goods required to run its operations and ensure profitability (Muller, 2011). The manager, therefore, ought to maintain a good working relationship with the organization’s suppliers by communicating effectively and addressing various company concerns or issues, for instance, delays in the processing of a particular order.
Additionally, a purchasing and inventory manager ought to be aware of the available suppliers within the region who may be willing to supply the company with product inputs at a better cost than the other suppliers. Thirdly, a purchasing and inventory manager is usually tasked with the responsibility of preparing and managing inventory documentation. An inventory manager ought to accurately record the style, type, quantity, quality, and other features of the inventory; this should be done as a way ensuring that the organization has a vivid understanding of the available and unavailable products. The effective management and preparation of the company’s inventory documents using a running tally also help the company avoid any possibility of shrinkage due to theft or loss. The inventory documentation prepared by the company’s inventory manager may also provide valuable data for various marketing purposes and in evaluating strategies to move inventory efficiently (Muller, 2011).
The manager should ensure that periodic and daily inventory audits are done on time and as required by the organization. He ought to evaluate and develop documentation which covers excessive days on hand, discontinued, and expired inventory. He should develop, maintain, evaluate, and distribute inventory reports to be reviewed by the upper management. He should also utilize various inventory systems such as Business Objects, SAP, and the Warehouse Management System during the preparation of the day-to-day reports or tasks (Wee, 2011). Fourthly, an inventory manager has a duty of purchasing new inventory. Some companies may have a different purchasing department which deals with the negotiation and signing of contracts with the company's suppliers. However, in small organizations, that duty may fall under the inventory manager's tasks. The purchasing and inventory manager ought to have adequate knowledge of the quantity of inventory in the company's warehouse. In instances where the inventory is running low, she or he must place the required orders to the appropriate suppliers and negotiate the timeline of delivery and the pricing of the ordered products.
Additionally, a good purchasing and inventory manager ought to familiarize himself with the knowledge of the company's inventory and implement the steps required to manage various issues associated with the company's inventory, for instance, the availability of too much inventory in the warehouse. Fifthly, the manager tracks the company's inventory. Overall, the purchasing and inventory manager is responsible for ensuring the company has the right quantity of stock to meet the needs of its consumers and avoid the overstocking of inventory since it often ties up the company's cash and creates various storage issues. He often ensures that the company's inventory is cycle counted and adjusted before replenishing and picking of inventory. He schedules, delegates, and make follow-ups on cycle counts, out of stocks, and shorts as required by the organization and provides feedback on out of stocks, safety stock, and DOH (Muller, 2011). He also ensures that the Root Cause analysis procedure is performed on various inventory discrepancies. Lastly, he often ensures that the inventory control employees are effectively trained and certified as per the company’s requirements to support the department’s operations. He should be able to learn different functions outside his department for a holistic perception of operations.
References
Jaber, M. Y. (2009). Inventory Management : Non-Classical Views . Boca Raton: CRC Press.
Müller, M. (2011). Essentials of Inventory Management (Vol. 2nd ed). New York: AMACOM.
Wee, H. M. (2011). Inventory Systems Modeling and Research Methods . Ne .York: Nova Science Publishers, Inc.
