What Is Inventory Control And Why Is It Important? - Edmonton Accountant

What Is Inventory Control And Why Is It Important?

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What Is Inventory Control And Why Is It Important?

Inventory Control

Inventory control may refer to operations management, logistics and supply chain management. Inventory control is required to keep a check on the status of your goods. Some goods may be in transit to the the warehouse, others may be delivered to your customers, or some of them may be returned back due to various reasons. Hence, you need to know how much inventory is available with you so that you can make necessary arrangements for producing more goods or reducing the production process. Here are a few more reasons that signify the importance of inventory management for businesses.

Reduces Order Cost

Expenses are incurred every time an order is placed. This can be in the form of completing certain forms and procedures, making calls, transportation cost, etc. Also, when the goods arrive, they have to be counted and inspected. With the help of inventory control, you can get a better understanding of the volume of inventory required for the time period. Hence, you do not have to incur costs regularly for ordering new inventories.

Avoids Stockouts

Stockouts can be a very bad phase for your business. This can lead to your competitor getting the edge because they have maintained sufficient inventory to cater to customers’ demand. If customers find your competitor’s product good for them, then you may even end up losing your customers. Thus, the best way to avoid losing out on customers is to have sufficient inventory to meet the current demand. This is possible only when you have an effective inventory control system in your organization.

Prevents Overstocking

With the help of inventory control, you can estimate how much stock will be required. Thus, it prevents you from overstocking your goods which again, will only increase your storage costs. Also, if you deal in perishable items, then overstocking is not the right solution, especially when you are unable to sell them immediately. Your goods may get spoiled at a faster rate and hence, cause huge loss for your company.

Protects from Fluctuation in Demand

At times, demand forecast does not always meet actual demand required. Fluctuations in demand for a product may always exist. Hence, you need to adjust these fluctuations by planning the level of inventories you need to keep with you. If the demand is less than what you forecasted, you should be quick to make adjustments to reduce your production process. In the case of a high demand, you should have sufficient stock available to fulfill the current demand and make the necessary modifications to increase your supply. Altering your production process is possible only when you have an efficient inventory control system in your organization.

Now that you know the importance of inventory management system, make sure you have one in your organization. Keeping a record of your inventory also helps you in easing your decision-making process. It is as much a necessity as managing your invoice efficiently For more information on managing your inventory, consult a professional  to help you out.

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