What Is an Inventory Control System?

Inventory management is a critical part of any ecommerce business. Choosing an effective inventory management approach will ensure you have the right stock at the right time to fulfill customer demands. An accurate inventory count system will help make your business more profitable by lowering the cost of goods sold; and it will also increase sales because you will have the stock on hand to fill orders.

An inventory control system will help streamline and automate the inventory management process for you. Here we will outline what an inventory control system is and what it can do for your business.

Defined: Inventory Control System

An inventory control system is a technology solution that manages and tracks a company's goods through the supply chain. This technology will integrate and manage purchasing, shipping, receiving, warehousing, and returns into a single system.

The best inventory control system will automate a lot of manual processes. It will provide an accurate picture of what inventory you have, where it is, and when you need to reorder to keep your stock at optimal levels.

Types of Inventory Control Systems

Inventory control systems have evolved. Earlier systems were little more than spreadsheets, and now machine learning is adding more automation to inventory control. There are two key types of inventory control systems.

1. Perpetual inventory system.

A perpetual inventory control system tracks inventory in real-time. As soon as a product is sold, its barcode is scanned and it is removed from a global inventory database. When one is received, it is scanned and added to the inventory database. Each part of the system has access to the same database and information.

A perpetual inventory provides a highly detailed view of inventory changes and an accurate accounting of inventory levels without the need for manual inventory counts. It is suitable for all sizes of businesses and is necessary for stores with high sales volume or multiple locations.

2. Periodic inventory system.

A periodic inventory system is kept up to date by a physical count of goods on hand at specific intervals. With a periodic inventory system, a business will not know how many products it has until after the physical count is completed. It is easy to see how this can be a problem when it comes to filling orders. Your stock count was accurate weeks or months ago, but now when a customer wants to buy, you have to physically check your inventory to see if you have it to sell.

Counting stock manually is a process that takes a lot of time and manpower. Each and every SKU has to be counted. This would not work well for a large store. A periodic system is only acceptable for smaller businesses with minimal amounts of inventory.

Why Are Inventory Control Systems Important?

For your business to run smoothly and be profitable, you need to have the product on the shelves when a customer demands it. Underneath this simple statement lies the complexity of purchases, sales, shipping, receiving, and storage. An inventory control system will automate and manage this complexity so you can focus on other parts of your business.

1. Real-time inventory levels.

A perpetual inventory system will update inventory levels globally whenever a product is sold, purchased, manufactured, or returned. With an accurate real-time inventory, you can analyze inventory flow to set effective reorder points. This helps eliminate out-of-stock situations and excess inventory. Real-time inventory levels improve customer relationships by preventing backorders and improving employee relationships by giving them an accurate view of inventory status.

2. Optimize your logistic workflow.

Your supply chain is complex. There are a lot of steps involved in getting a product to your customer. An effective inventory control system will not only allow you to track a product each step of the way, but also give you the tools to find bottlenecks in your logistic workflow. This gives you more time to work on improvements.

3. Financial savings.

There are many ways inaccurate inventory can cost you. If you don't have a product in stock, a customer could cancel an order and buy that product somewhere else rather than wait on a backorder. On the other hand, an inaccurate inventory can also lead to excess stock which will increase storage cost, insurance cost, and taxes. An inventory control system will save you money by keeping inventory at optimal levels.

4. Reduce manual labor inaccuracies.

Physical inventory tracking can be prone to errors and fraud. By tracking a product from purchase order to customer delivery, an inventory control system will take human error and theft out of the equation.

5. Improve customer satisfaction.

In this day and age of next-day or even same-day delivery, customers expect to get their orders quickly. If your inventory is inaccurate, a customer could order an item you show in stock but don't actually have. This could result in a backorder or canceled order, which can lead to an unhappy customer who may not order from your store next time.

Conclusion

Inventory is the lifeblood of any ecommerce store. Having the right products in stock will prevent backorders, keeps customers happy, and make your business profitable. A robust inventory control system will do much of this work for you by automating manual inventory control processes, streamlining your logistic workflow, and giving you a real-time view of inventory levels.