Inventory control is a must for every warehouse, but with so many inventory control methods to choose from, it’s often difficult to determine which method is right for your business without a lot of costly trial-and-error (not to mention wasted time).
Not only does efficient inventory control save your warehouse money, but it also boosts customer satisfaction by giving your customers access to the products they need, when they need them. And of course, happy customers mean repeat business – giving a further boost to your company’s bottom line.
To gain some insight into the best inventory control methods that can help your warehouse achieve leaner operations and a healthier bottom line, we reached out to a panel of inventory management experts and asked them to answer this question:
“What’s the #1 inventory control method to save warehouses money?”
Meet Our Panel of Inventory Management Pros:
Read on to learn what our experts had to say about the inventory control methods that could save your organization money.
Doug Orlove is the Vice President of Operations at Amify. As VPO, he oversees operations and logistics and manages our in-office warehouse. He has almost 20 years of experience focusing on Warehouse Management and Operations at Pepsico and Dole, and now at Amify.
“Ensuring the optimal amount of inventory on hand through demand planning is…”
Key to maintaining an efficient product flow through the warehouse. Excess inventory amounts will contribute to handling and storage costs, while inventory shortages slow down the order fulfillment process and affect customer service. Forecasts can be improved by adopting supply chain management concepts such as information sharing. Point of sale data is harnessed to provide accurate base demand levels. Layering seasonality and trends on top of the base demand will provide an accurate projection of future product needs.
Andrei Vasilescu is a renowned Digital Marketing expert and CEO of a money-saving platform in the name of DontPayFull. He has been providing cutting-edge digital marketing services to various international companies and different online coupons of various brands for years.
“Frequent auditing is essential…”
Frequent reconciliation of the inventory of your warehouse can save a lot of money in different ways. Regularly auditing the stock of your warehouse will help you stay on top of the status of your inventory. These auditing reports will tell you exactly what you have in your stock and the details of every item in the existing stock. These details will allow you to know about the things which remained stationary for a long period. This is especially vital for perishable items or the items which are near their expiry date; you can take necessary action to avoid any financial loss for spoilage. Moreover, this regular reconciliation will help you to manage your stocks properly, and you will not miss any sudden earnings opportunities. Therefore, regularly take physical and by-book reconciliation of your inventory to save your warehouse money.
Jayneel Patel is Managing Director and Co-Founder at Orderhive, an inventory management software.
“There isn’t really a #1 inventory control method to save warehouses money…”
But there are a couple of practices that a business needs to apply to carry out proper and successful inventory management and control. Inventory management is an integral part of running any business. And the inventory is the most valuable resource for any retailer or business owner. Inventory management is having the right number of products, at the right time, in the right place. There are a number of methods that can result in good inventory management and control.
1. Set par levels
Setting a par level could be a possible solution. A par level helps
you gauge the minimum amount of stock you always need to have. If a stock level drops below a par level, then you know that you need to order more stock of that particular item or else risk failing to fulfill customer orders.
2. Demand forecasting
The main motive is to make predictions and estimations for the future demand for a product and also to find potential markets for it. A demand forecast specifies the needed inventory that will help to combat fluctuations in demand.
3. First-in-first-out (FIFO)
The first-in, first-out method assumes that the oldest items put on the shelf will be sold first. This method is especially beneficial if the business deals with perishable items such as food, medicines, cosmetics, etc. FIFO could also be a good idea for non-perishable items. If a product is always sitting on the shelves, it may eventually get worn out, expire, or become outdated.
4. Inventory risk management
Some of the common types of risks involved are theft, wastage, damage to goods, shrinkage, and sudden spike or drop in a product’s demand, among others. The key move is to gather all essential data in real time from every point in the supply chain in order to identify areas of weaknesses and loss.
5. Auditing and cycle counting
Regular large-scale audits of your entire inventory are important. The audit goes through each item in the warehouse; how much of a product you say you have should match the information in your stock books. Cycle counting is a quicker, small-scale alternative to a full audit. Also known as a partial audit, the cycle count is an inventory auditing method wherein the warehouse is divided into smaller sections and the inventory is counted.
6. Inventory management software
An inventory management software will arm you with real-time data, so you know exactly how much or how little inventory you need. With the help of an inventory management software, every piece of your inventory will be accounted for. It will also track your goods right from the moment an order is received, its journey through the supply chain until it leaves the warehouse for shipping.
Robin Schwartz, PHR
Robin Schwartz is the Managing Partner/Content Writer for MFG Jobs.
“The #1 inventory control method to save warehouses money is…”
Regular auditing. Consistent reconciliation of inventory is essential to ensuring that software or floor reports are accurate. It’s important to know exactly how much stock you have at all times. If your warehouse deals in products with an expiry date, it will be necessary to regularly audit this inventory to ensure you’re practicing the principle of “first in, first out” to prevent any unnecessary spoilage. Ruined product will cost warehouses monetarily.
Jennifer McDermott is the Consumer Advocate at Personal Finance Comparison Website, finder.com. She has more than 12 years’ experience under her belt in the finance, lifestyle, and travel industries where she’s analyzed consumer trends. Jennifer loves to uncover interesting insights and issues to help people.
“There are a few inventory control strategies that can save warehouses money…”
1. Create a floor plan
A floor plan allows you to visualize where you want to store your items. When creating your floor plan, you can label and group items together in order to make finding them easier in your day-to-day. A floor plan will help you utilize all of the space you have. By strategically organizing you can have a better idea of what you have in order to prevent over-ordering items. It also helps ensure employee safety, which will steer you clear of any legal fees that you would be faced with if a worker were to be injured on the clock.
2. Set par levels
A par level is the minimum amount of stock you need to have in your warehouse. When your inventory is below the par level, it’s time to order more. By setting par levels, you’re ensuring that you will always have enough inventory to make a profit.
3. Be aware of what you have in stock
Auditing your inventory regularly also helps prevent a lack of stock. Although you may use a system similar to par levels, it’s important to double check to make sure the numbers are adding up correctly. Maintaining your inventory can help you avoid inflated prices on items that you previously ordered at a cheaper price. If you need to order an item in a rush, you may also be faced with expedited shipping charges.
4. Negotiate inventory costs
Your relationship with your supplier is almost as important as your relationship with your customers. Once you find a good supplier, loyalty can go a long way. If you are regularly ordering from one supplier, you may qualify for a discounted rate on your future purchases. A good relationship with your supplier will also guarantee more support in the case of a damaged item or delayed shipment.
5. Check your deliveries
While unloading your shipment, take note of what you are actually receiving before you place the items on the floor. Inaccuracies or damaged items could lead to a loss in money if you are paying for an item that you never received.
6. Assess shipping options
Make sure you’re aware of the different shipping options that are available to you. You could be spending more on shipping than necessary just because of a lack of information.
Mostafa Hosseini is a Business Coach and Consultant at Persyo.
“The #1 inventory control method to save warehouses money is…”
To conduct an 80/20 analysis on your inventory to see what is selling and which products are wasting your space so you can get rid of them.
Here is an example:
Product name, Number of units sold, Percentage of sales:
In this example, we can get rid of products G, H, I, and J, save space and restock from the top 20% of the products that are bringing 80% of the sales.
With this method, you can save up to 80% of your warehousing costs.
Abby Perkins is the Director of Content at Glew.io, an ecommerce analytics and BI platform.
“The best way to save money on inventory is to…”
Have a clear understanding of your sales data. If you know which products are selling and which are sitting on your shelves – and you can go a level deeper and know which products are selling in which seasons, which are performing best in which channels, which products are bundling well with other products, which ones are being returned, and what your cost of goods sold, revenue and margins are for each product – you’ll be able to make smarter decisions about ordering, promotions, and even where to allocate your marketing dollars. Glew.io connects all your sales and marketing data from various sources and lets you segment products by things like High Volume, High Margin, Most Profitable, Discounted, Hot and Cold Products, Top Bundled, Most Refunded, Most Abandoned, and more so you can keep a consistent handle on your inventory data and keep costs low.
Srajan Mishra is the CEO of TSI Apparel. He is an electrical engineer by degree but an entrepreneur at heart.
“One of the inventory control methods to save money would be to use the ABC technique…”
It is used to determine items that should be prioritized over others. It is done by dividing on-hand inventory into three divisions: A, B and C.
- A would be of high value with low sales frequency.
- B would be moderate value with moderate sales frequency.
- C would be low value with high sales frequency.
This would give you an idea of what items are to be given more importance and where even a small mistake could cause big issues. It could also help in setting up the layout of the warehouse. For example, C group items are more popular, so placing them closer to the packing area would be more efficient.
Tim Stevens is the Operations & Logistics Manager at Find Me A Gift.
“One of the best approaches to save warehouses money is…”
Keeping track of warehouse inventory, and we do this by cycle counting, also known as Perpetual Inventory (PI).
Perpetual Inventory is a process where a section of the warehouse is closed from any stock movements, the stock is counted, and then this count is checked against the warehouse system. Any discrepancies can then be investigated and adjustments made. The results can be tracked to form a stock control KPI, which should be updated weekly to show any stock trends and improvements.
PI can deliver a wall-to-wall stock take multiple times a year aiding stock availability and giving more confidence in stock levels.
Diego Vilardo is the International Trade Affairs and Customs Regulations Associate Manager at Roche Pharmaceuticals.
“Deploy end-to-end supply chain visibility…”
When there is a need to respond quickly to changing market requirements and urgent customer requests, relying on phone or email to get timely updates is not the best control method. Market conditions change much too quickly for that. Suppliers and distribution centers may be in different time zones. Therefore, there is a need to be able to access inventory and fulfillment status information in real-time. That makes a cloud-based supply chain network an essential component of agile inventory management. As personal advice: companies should eliminate silos within their organization to take full advantage of end-to-end visibility. Create an outside-in way of thinking within the organization by focusing on customers and trading partners instead of looking internally.
As the President of RTG Solutions Group, Khris K. Bhattan’s passion and success lies in leading teams that solve problems, eliminate waste, reduce costs, and increase efficiencies. Khris is the impetus to change as he identifies, develops, trains, and implements systems that ensure organizations’ success in a competitive marketplace.
“First, there should be a solid ERP system implemented and embedded in the daily work of warehouse workers…”
Assuming functionality of the ERP, daily, weekly, or monthly cycle counting of inventory is the best control method for cost savings in a warehouse environment. An added benefit is a management system that provides the opportunity for complete employee engagement at every level of the reporting structure. To eliminate wasteful operations and save money, it’s crucial for individual contributors to have the ability to quickly escalate issues to leadership and for leadership to quickly flow information down and across workstreams.
George Keliher has been involved in the making and stocking of parts for over 30 years, both as an entrepreneur and as a small business consultant specializing in inventory management. George is having so much fun with LOCATE Inventory that his retirement plans have been put on hold.
“The best way to save money in your warehouse is…”
By using an inventory management software that instills best practices into each step of the workflow. Programs that offer shortcuts and workarounds often times lead to missing inventory, inaccurate costing, and ultimately, loss of profits. The right software can make a big difference when it comes to keeping your business moving forward. Naturally, human-error (packing mistakes and other warehouse inefficiencies) can also plague warehouses, and having the right mobile inventory solution can help warehouses save money by being more efficient and accurate on the ground. Cycle counting is another best-practice that is a great way for warehouses to save money. It allows warehouses to cycle count any time of the day.
Aaron Moore has been the Fulfillment Manager at One Click for 10 months and graduated from Franklin College in 2012 with a degree in Business Management and Industrial Relations. He studied abroad in Hong Kong and has worked in leadership for 5 years.
“Cycle counting is the single most important aspect of inventory control…”
Although all inventory control methods are important, Cycle Counting allows for a more accurate representation of inventory levels throughout the year as opposed to one giant inventory count during the year. Stock levels need to be accurate for tax purposes and Par Value ordering, but the reason Cycle Counting is the most important is because it affects the customer.
A common issue facing retailers is inaccurate stock levels allowing a customer to purchase an item that is actually out of stock, giving the impression that the company doesn’t run a very tight business. Therefore, the consumer loses faith.
Without customers, companies and warehouses cease to exist. Businesses should stress inventory accuracy through Cycle Counting as a means of creating customer happiness.
Pete Sheridan is the founder and owner of Manchester-based Ryan Air Conditioning Spares Ltd, an Insulation & Air Conditioning Logistics company with multinational eCommerce Stores throughout the UK and Europe.
“In my experience, the #1 inventory control method to save our warehouses money is…”
Using the correct tracking software. To that end, and having worked with many down the years, we now swear by using Sage 50. It allows you to keep incredibly tight control over what you stock with the stock re-order levels. It adjusts our stock levels online after each stock take and optimizes our tracking and administration in real time.
It has had a significant impact on our bottom line. As such, it has to rank as our number one inventory control method at this time.
Reuben Kats is the COO/Web Design Sales Engineer /Customer Service/ Account Manager at GrabResults,LLC.
“In order to keep track of what comes on and off the shelves in your warehouse, one needs to…”
Set up a certain portal or dashboard where they keep track of their products. Any business that has hundreds of thousands of products should develop their own software where they can process all products as well as provide the business with transparency with the employees.
I used to work and help run a warehouse in the past and found that a lot of the employees were thieves. The business was losing money and couldn’t understand why. Developing a dashboard that prints out barcodes is a great way to keep track of all the products and make sure no one is tampering with your products. Some warehouses even hire security guards with wands that check the employees before they leave for home. GrabResults, LLC and Falcon Marketing, LLC build modern and custom software for clientele so they can integrate their products to their database and keep their inventory up to date. Our design is sleek, modern, and gets visitors purchasing from our clientele.
Communication is key when it comes to inputting inventory, quantities, and what is in stock and out of stock. Communication will be the reason why errors come up. I highly recommend all vendors input their data to a project manager and have the project manager manage the platform. I think it’s very important to market your products and have your vendors market your business as well with the same deal. The reason why most companies suffer is because the message isn’t clear from the beginning.
Multiple companies can advertise the same product, but the price is different. That can stir up some confusion regarding authenticity and other issues. If vendors want to help the business, they need to use their client’s marketing strategy. Magento is a great platform that can organize cash flow and one can always add more plugins to the backend so it can have QuickBooks and other integrations. In order to keep a great relationship with vendors, one should order in bulk so confusion doesn’t happen as often. If a business is buying once a week, the chances of having issues come up are more frequent. One should order in bulk maybe once a month or every couple months so they don’t need to keep adjusting quantities, RMAs, etc.
Amjad Hussain is the CEO of Algo.ai, an Enterprise AI company that has developed the world’s first Supply Chain Analyst Bot. Algo.ai uses Big Data, Machine Learning, and Artificial Intelligence to help retailers, manufacturers, and distributors with accurate Forecasting, Demand Planning, and Inventory Management.
“Prescriptive Analytics is the most powerful tool in optimizing
The explosion in the availability and accessibility of data is creating new opportunities for better decision making in applications of inventory control. Prescriptive analytics starts by predicting consumer demand and then using Machine Learning to recommend the optimal inventory levels to make the most profitable use of warehouse space. Demand is the key uncertainty affecting inventory decisions, which presents a huge opportunity to leverage transactional data combined with large-scale, publicly available data such as web search queries, reviews, and social media chatter to optimize inventory and improve warehouse profitability.
Brandyn M. Cox
Brandyn Cox is the Owner of BMC Accounting LLC. BMC Accounting has been providing a comprehensive accounting solution to small and medium sized businesses since 2017. BMC Accounting LLC is an entirely virtual accounting service.
“Warehouses have to maintain and track costs accordingly to ensure profit margin demands are met…”
There are several strategies that a warehouse can implement to reduce costs, waste, and unnecessary labor. Just In Time Inventory, also known as JIT Inventory Method, is a method where inventory is ordered on demand at just the right time. The response is to order more inventory derived from market supply.
Many large corporations such as Toyota use JIT Inventory Method. This is in contrast to many companies who utilize a traditional warehousing method of holding large quantities of inventory. The traditional method costs more in rent or debt to own the property square footage, it incurs higher costs for utilities, and requires more employees to track and maintain the inventory’s quality. JIT Inventory Method allows for companies to order raw materials, finished goods, or intermediate inventory only when needed. Although the overall cost implementation of JIT Inventory Method is a cost saver, the initial cost may be prohibitive for some companies. For the JIT Inventory Method to work efficiently and effectively, there will need to be software systems created and shared with vendors, agreements in place with vendors for pricing per units under this method, and training of staff.
Aside from a major overhaul of traditional inventory to the JIT Inventory Method, a warehouse can also put into action other smaller scale practices. Bar coding and Radio Frequency Identification (RFID) will maintain inventory and track its status and location in the warehouse along with quantities on hand and what the par amount should be on hand.
Also, inventory management software is critical for warehouses in order to have an approved vendor list accessible, vendor catalogs, match purchase orders with packing slips and invoices, and to be able to purchase inventory when needed. By reducing warehouse overhead and square footage, the unused space could be used to rent to other companies who need an overflow for their warehouses, which will generate revenue that otherwise didn’t exist.
Huib Maat is the in-house perfumer at Pairfum, a London based Artisan Fragrance House.
“We faced these challenges in our warehouse…”
- Large variety of components and ingredients
- Seasonality in the supply of ingredients (e.g., perfume oils) and seasonality of sales (e.g., Christmas)
For us, the single best tactic to optimize our supply chain, was to digitalize everything. In other words, everything received a barcode which allowed us to move the supply chain to the cloud.
Robert DeStefano is a senior product marketing manager at Ivanti Supply Chain. He has more than 18 years of experience helping businesses understand the value of mobile technology solutions when it comes to boosting worker productivity and enforcing mobile security.
“Stockouts are a nightmare at any time of year, but…”
During the peak holiday season, the damage is magnified. Lost revenue, compromised customer satisfaction, negative press – a missed peak season can haunt a business for many years to come. So, how can businesses throughout the supply chain avoid a stockout? One of the ways is through supply chain convergence which will, over time, deliver great value.
When it comes to Black Friday, for example, the opportunity boils down to this: What if you could know when a truck carrying this season’s “must have” gift is 5 minutes from your loading dock? Blockchain – the centerpiece of supply chain convergence – will make this possible. Integration among warehouse management, enterprise resource planning, and transportation management systems – WMS, ERP, and TMS, respectively, can ensure that more stock is ordered in time, that staff is available to distribute it, and that the warehouse knows the exact arrival date (and time).
An integrated supply chain can ease the connection and sharing of data among systems and enable visibility across participants in your supply chain, which can ultimately result in time and cost savings for warehouses.
Dr. Cozette M. White
Cozette is the Founder and CEO of My Financial Home Enterprises, a global financial consulting firm providing comprehensive accounting, tax, and financial management services for businesses and individuals. My Financial Home has been featured in Forbes Magazine and named one of The Boss Network’s top 50 companies two years in a row.
“Managing the inventory is the number one thing that will save the organization money…”
This effort requires a conducive team that works together with one common goal – reduce inventory levels, increase working capital and liquid cash.
The team consists of a cost accountant, shipping and receiving, warehouse, product supply, buyers, and external auditors.
The team will need to ensure that they forecast accurately, manage inventory levels, use FIFO inventory method, manage the relationship with suppliers, and audit using the ABC method along with regular spot checks, physical counts, cycle counts and more. Implementing these steps to properly manage inventory and perform the steps routinely will save the organization money.
Alisha Raesz is a specialist in accounting software for manufacturing businesses at Fourlane. She holds advanced certifications in QuickBooks Desktop, Enterprise, Online, and Point of Sale, as well as Acumatica ERP. She has worked with more than 900 small and mid-size businesses to optimize inventory and financial processes.
“Cycle counts (i.e., continuous partial inventory audits) are the best way to control inventory because…”
They provide constant updates on inventory status. Companies that are doing 1 or 2 full inventory audits annually are slower to spot discrepancies and thus will be slower to course correct. Businesses I’ve worked with who transition to cycle counts see immediate value as things that might go unnoticed until the end of the year are caught and documented on a regular basis. Quantity, location, expiration dates, and other important info is updated constantly, which provides a better customer experience and gives client-facing employees more knowledge and confidence. And it also eliminates the need to completely close down operations for 3-4 days to do a physical count, since cycle counts mean specific bins, lots, or warehouses are tracked on an ongoing basis during normal operations.
Amber Fullerton is a Chief Customer Officer of One World Direct, an e-fulfillment and call center company with warehouses in California, Ohio, and South Dakota.
“The #1 inventory control method to save warehouses money is…”
Being rigorous with your inbound receiving process. If you always know exactly what you have coming in, and you optimize that process to minimize the chance of human error, you save yourself from so many of the headaches that can arise with inventory management.
Some easy wins to do this are asking manufacturers to separate SKUs when shipping product to eliminate manual sorting, using a labeling system and cross-checking counts with more than one employee to ensure accuracy. The real fun comes in being creative. When you take a look at what you’re receiving, identify the pain points, then brainstorm with your team to develop unique processes that minimize room for error.
Yes, forecasting software can be key as you develop enough volume to justify the time and expense, but your software is only as good as the data you input, so micro-managing your inbound receiving is the area we put the most focus on refining and improving to save money in the warehouse.
Scott Burday is the President of Trinity Integrated Solutions.
“Barcode scanning is a fantastic tool for inventory management that can save warehouses money…”
Barcode scanning allows you to accurately track and record all the data about your inventory, sales, and shipments in real time. This inventory data can then be stored and easily referenced.
With a barcode scanning system, you always know an individual products status. You will be able to optimize when you order new inventory. This is even more important when you have multiple warehouse locations.
Finally, a barcode scanning system allows for a smooth integration with your accounting department. The benefits of barcode scanning are that you avoid costly errors from annual reporting and RFID errors, you will save time, and you can set these solutions up quickly.
Hassan Alnassir is the founder and owner of the kids’ toy business, Premium Joy.
“The top inventory control method to significantly reduce warehouse expenses is…”
Automating the process of tracking the units. You should have a system in place that lists and tracks all items in the building by SKU, quantity, weight, dimensions, and storing location. The software used needs to account for any inventory units moving in and out of the warehouse when scanning the item’s barcode. Making the inventory tracking more hands-off reduces the number of workers needed, improves the accuracy of record keeping, and saves great deal of time, which essentially leads to significant money savings.
Tony Deutsch, CPA, MT, CGMA, is a shareholder at Concannon Miller, a CPA and business consulting firm with offices in Bethlehem, Pa. and St. Petersburg, Fla.
“Perform inventory counts…”
First and foremost, your inventory must be correct and verified. Without an accurate inventory count, you don’t know what your true costs are, and if you don’t know what your costs are, you can’t control them. Your month end should always be counted and verified. After the first person counts the inventory, a second person should take a print out of the inventory and verify each item and sign off on the first count, or make corrections as needed.
Some business executives do interim inventories, either nightly or weekly. If you find that your interim costs are not in line with your monthly verified cost, you will need to take steps to insure the accuracy of the interim counts to avoid month-end surprises. Another good tool that can be used in the verification process is random surprise inventories.
Here’s another option that works well for larger companies with multiple departments or businesses: Once or twice a year, have each manager or department head count a different department’s or business’s inventory. In other words, pull a switch-a-roo and each employee will count the inventory of another department or business.
Some business executives say this is a good learning experience for their employees, as they get to see how other employees handle their inventory, and it also helps to alleviate the in-store blindness that affects employees when they see the same thing day in and day out. Some employees might even think of this as is a fun change of pace.
Stephen Paul is a Content Creator at Orderhive.com, Stephen has always believed in giving his articles a whimsical flow. Quite obsessed with the high marvels at Dubai, he finally chose mountains over beaches. Being quite generous when it comes to penning down for Orderhive, Stephen never steps back.
“It’s really tough to figure out which method of inventory control really stands out on top…”
Every particular method behaves differently, depending on the type of products that are sold, selling strategy, size of the warehouse, etc.
Now, the ‘kanban system’ is the biggest technique that has systematically drawn inventory control towards betterment. The kanban system visualizes both the workflow and the actual work passing through the flow. It helps avoid supply disruption and overstocking of products or raw materials at any stage in the value chain.
But, to implement a kanban inventory control system in your business that can help you streamline your order management process and save warehouse space, you need to first carefully monitor your inventory. The entire process is slow, takes a lot of time, and requires patience, but is very much reliable.
Ryan Chan is the Founder & CEO of UpKeep Maintenance Management.
“For warehouses who want to save money…”
The best practice for inventory control is inventory management. A mobile-first management system is ideal because it updates in real time and allows you to tag individual parts. Further, inventory efficiency is streamlined with ease of item count and purchase, and costly errors in stock – or lack thereof – are immediately reduced.