6 inventory control techniques for stock optimization

6 Inventory Control Techniques
for Stock Optimization
M: +91 9611 171 345 Email: sales@salesbabu.com

6 Inventory Control
Techniques for Stock
Optimization
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.

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.

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.

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.

Inventory management techniques for 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.

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.

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.

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.

Inventory management techniques for stock Optimization continues..
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.

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.

6 inventory control techniques for stock optimization

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