Sellers and Retailers have a common goal, that
is to provide the right selection of products, producing maximum sales and
profit. Inventory management ensures that you have the right product in stock
for the right customer at the right time.
Inventory management is the
maintenance of record keeping systems used to keep physical and financial
control of your inventory levels. The physical controls help you maintain the
right quantities, colours, sizes and styles of goods for your customers. The
financial controls help you know how much to buy and the resources you have
bound in inventory.
SET UP CONTROLS
You
should set up an inventory control system appropriate to the size of your
operation. This system should tell you when merchandise comes in, when it goes
out, and how much you have in stock. A Management Consultant can help you devise
a system that will assist you in collecting suitable inventory information for
your company.
Your physical inventory control system should have at least
two main parts:
- perpetual unit control mechanism
- periodic hard physical count
A third which often helps, your
knowledge of your own inventory, will permit you to keep a visual check of your
inventory.
Perpetual unit control is, when ideal, a per business
transaction function that records, on a unit basis, the receipt and sales of
inventory items. It involves:
- entering items into inventory from suppliers' invoices and packing slips
- monitoring incoming goods and collecting sales information (from electronic
cash registers)
You may wish to record inventory movement:
- per business transaction
- daily entry
- weekly entry
- monthly entry
A per business transaction control method lends
itself best to a completely electronic system where updates are done via a
computer's internal software program. Many of today's POS systems are capable of
this type of inventory control. New inventory items can be entered into the data
base at any time and are immediately updated. A periodic hard inventory count is
still necessary due to human error and possible theft.
HARD
COUNT INVENTORY
A complete periodical hard physical count of
stock is the process known as "taking inventory." Taking inventory is usually a
team effort, one person counts the stock while the other records the quantities
on inventory sheets or electronic inventory counters. Today there are software
programs and bar code readers that will automate the process entirely. The
inventory count operation will normally be done at your fiscal year end, before
you prepare for your annual financial statements. Better control is achieved if
you take inventory quarterly. It is also a way to identify slow moving
merchandise.
Your physical inventory control when combined with financial
controls will assist you to match merchandise quantities to anticipated
sales.
FINANCIAL CONTROL
A written financial
control should account for opening monthly balances and purchases while
comparing them to your planned sales. This comparison will assist you to avoid
being over or under stocked.
Written controls will assist you to
determine how much merchandise you can afford and whether you should make
adjustments to your sales plans.
With physical and financial inventory
controls in place your system should tell you:
- when projected sales are not met
- when your stock levels are too high or low for the sales level
- when your goods are turned over slower than you expected
- when your gross profit is slipping
Inventory control is a
necessary part of good retail management and is vital to the ongoing success of
your business.
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