6 inventory control techniques for stock optimization

6 Inventory Control
Techniques for Stock
Optimization

Contact Us: M: +91 9611 171 345
6 Inventory Control Techniques for Stock
Optimization
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www.salesbabu.com Email: sales@salesbabu.com
Inventory management is applicable to every economic industry, due to its
underlying on demand and supply variability which is common across every
business model.
As we all know that with growing businesses, we should have an efficient, effective,
and innovative inventory management technique system, which will not only keep
track of our growing stock requirements, but also maintain the high rate of
warehouses used to store these inventories. Some studies show that almost half (46
percent) of small businesses don’t use inventory control techniques at all and
manage their inventory using spreadsheets and documents, which can be quite
inefficient for a growing industry.

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What is Inventory Optimization?
Inventory optimization is an approach to understand and quantify the uncertainties
involved in the demand and supply chain across multi-level supply scenario.
Inventory optimization has become very crucial in the past few years due to its increased
usage in improving business revenue. Today it is considered a core competency at both
mid cap and large scale industries. The core competence of this methodology is to reduce
the working capital invested on the inventories without damaging service levels.
In short, inventory optimization scientiﬁcally determines the minimum stock requirements
across the entire supply cycle without disturbing the demand supply chain of the
organization.
The main functionalities of inventory optimization system are as follows:-
● Maintaining the minimum cost of average on-hand(stock level) inventory.
● Achieving the highest desired rate for the inventories.
● Least reorder frequency.
● A clear understanding of the company's inventory performance using inventory
management software.

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What is an inventory management
technique?
As we know, Inventory management is the process of tracking every stock which comes in
and goes out of a warehouse starting from manufacturing till the final product delivery.
There are many inventory management techniques and softwares which have many
efficient ways of controlling our company's stock and improving overall business revenue.
However, choosing these correct techniques or the stock control software is very crucial for
maintaining a proper balance between out of stock and over stock situations to optimize
ROI for the company.
Efficient Management and inventory tools like SalesBabuCRM, provides a complete
package from managing business processes to inventory management for every business
model. SalesBabuCRM provides an inventory management system , which is far more
robust than the old-school spreadsheet system. Using these advanced techniques in the
software, we can monitor how much inventory we have at any given time across all your
sales channels while utilizing reporting capabilities that provide insights into your business
and customers.
Identifying the missing links between your business investment and the missing or excess
inventory usage, will be the best way to improve your business revenue. SalesbabuCRM
helps to identify the reason behind missing or lost inventory which is the most critical
aspect of your brand’s success.

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Inventory management techniques for
stock Optimization
Stock Audit
Usually, inventory management fails is many organizations due to unorganised product
labels, tagging, and other inventory detail management. Softwares like SalesBabuCRM
provides a cloud based centralised database which will have clear details on every raw
material, purchased goods, the location of each item and other information on each and
every product. This will help to locate and track every item in a systematic manner. Manual
tagging and human errors are considerably reduced with these organised methods of
tracking every inventory in the warehouse.
Apart from automated inventory management, we need to have a systematic technique of
auditing our stock level from time-to-time to understand our stock health level.
● Physical inventory auditing is comparison of the numbers that your operations team
has speculated and the ones that are on-hand at the end of each year.
● Cycle counting is a great way to close the gap between what inventory we actually
have and what our brand thinks it has. This auditing is usually done in a few months
interval.
● Spot checking is done throughout the year with surprise visits to check the stock
upkeep and avoid any theft and misuse.

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stock Optimization continues...
Preparation of Inventory Budgets
Budgets are the basis of the inventory management in many organizations which deals with a
huge amount of stock purchases. These budgets should be created well advance to
understand the amount in hand for stock procurement and stock adjustments from past
purchases.
The sales budget provides the basis of the production plans, followed by which the
adjustments of the stocks are made with the already available stock in hand. Also, the value of
the product in the future and current rate both should be considered while creating these
budgets for a better revenue planning.
Once the budget is created and divided for every department, it should be communicated to
every stakeholder clearly to regulate the actual purchase commitments from each team.
Also, periodic check on these budgets should be verified with the current procurement state to
understand any diversion from the initial plans.

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Just In time inventory
Just-in-time inventory technique allows companies to decrease the amount of inventory in
their warehouses by keeping a low stock of various product and replenishing it as needed.
These stocks are ordered and reﬁlled just before the “out-of-stock” and are usually done for
companies which need delivery a few days in a week.
Just-in-time inventory helps to keep the pricey warehouse maintenance and upkeep cost
to as low as possible by avoiding any extra stock storage.
Cloud-based inventory management systems like SalesbabuCRM, give your team the
opportunity to have clear and precise visibility of your required inventory at anytime,
anywhere, which will help to optimise operational cost and make informed business
decisions for inventory requirements.

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ABC analysis
Every item in a warehouse has its own value and wear and tear state. Hence, to maintain
these different items we should have a specific way to deal with different level of care
needed for various varieties of products in stock.
An effective controlled exercise over materials is done through - A.B.C. (Always Better
Control) method of inventory management.
Under this method, every material is classified into three categories in accordance with
their respective values.
● Group ‘A’ constitutes costly items which are around 10 to 20% of the total items, but
may account for around 50% of the total value of the stocks. A great amount of care is
taken for these items to maintain their health and preservation.
● Group ‘B’ consists of items which constitutes around 20 to 30% of the store items and
contribute about 30% of the total value of the stocks. A reasonable amount of care is
taken for these items.
● The last category constitutes the 70 to 80% of the items is covered costing about 20%
of the total value. A regular upkeep is maintained for these items.
This selective value approach ensures a considerable reduction in the storage expenses
and acts as a great help in preserving costliest items with utmost care.

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Demand Forecasting
Demand forecasting is a technique to understand the trend of demand and supply chain
and make more informed decision on the required stock levels in the warehouse.
Demand forecasting capabilities should include:
● An appropriate forecasting algorithm should be selected as per your business model
and requirements.
● Every stock item should be considered separately as per its overall value and
customer popularity.
● Clipping and ﬁltering techniques of the metrics and analysis generated through
inventory management software for managing and understanding abnormal data
trends.
● Capabilities to understand the expected future events or trends and maintain the
stock levels appropriately.

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Organisation’s Planning Process
Starting with organisation plans at the strategic level such as - where products will be
manufactured, which raw materials will be required to fulﬁll the manufacturing process,
which locations will store inventory and other like vendor supply chain and target customer
service levels and more.
These details are then used to develop plans at a tactical level – how much of each
product do we build, when and how much safety stock will be needed. Finally, these plans
go to execution with ERP management processes.
We need to plan and organise our techniques based on each of these phases and create
better policies and involve management tools which can be helpful in each stage for a
better performance.Strategic, tactical and executional planning is the key to a successful
business model.

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Conclusion
In less than a decade, inventory optimization techniques have
emerged as a proven technology shift to considerably reduce total
inventory requirements while maintaining or improving customer
experience level. With these numerous advantages of tracking and
maintaining out stock levels, inventory optimization is now recognized
as a core competency which is very critical for improving business
performance and revenue generation.

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Our Address
SalesBabu Business Solutions Pvt. Ltd.
No.38/11, 3rd Cross, G Block, Sahakarnagar, Bangalore – 560092
Tel: +91 9611 171 345 ,
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E-mail: sales@salesbabu.com
Website: www.salesbabu.com

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