Stock control methods
/How to Control Inventory Levels
Stock control is the practice of balancing the need to maintain inventory levels against its cost. The ideal outcome of stock control is a minimal investment in inventory, while still being able to fulfill customer orders in a timely manner. Counterbalancing these two goals can be something of an art form. More specifically, stock control can involve the following activities. There is no perfect state that can be attained in the stock control area. Instead, the planning staff is always balancing the demands of different parts of the business to attain a reasonably optimal solution - which may change the next day.
Use Just-in-Time
Use a just-in-time production system that only builds goods when there is specific demand for them. This action pleases those in favor of minimizing the inventory investment, and may speed up delivery times. However, any supplier delay can cause substantial problems with the flow of goods, so this approach tends to work best when suppliers are located adjacent to the company.
Reduce Product Offerings
Reduce the number of products offered. This reduces the total amount of inventory investment, but gains the ire of the marketing staff, which wants to offer the broadest possible range of products to customers. Thus, this approach will reduce inventory levels, but at the cost of a decline in some sales.
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Expand Warehouse Locations
Set up warehouses near large customer concentrations, so that goods can be more rapidly shipped to them. This approach is targeted at greater customer service, but can require an increased inventory investment.
Minimize Purchases
Order the minimum amount of raw materials needed for specific production runs and reordering more frequently, in order to reduce the investment in raw materials.
Use Production Cells
Create cells in the production area, which are responsible for creating goods or sub-assemblies from start to finish. Doing so reduces the investment in work-in-process, while still delivering goods in a timely manner.
Automate Picking
Install automated picking systems, so that goods can be shipped from warehouses more rapidly.
Use Adjacent Suppliers
Locate suppliers near the company's production facility, so that delivery lead times can be reduced. Doing so reduces the need to maintain expensive safety stocks in-house. It also eliminates the risk of deliveries being stopped by any number of factors during the transportation process, such as fires, floods, earthquakes, and traffic accidents.
Use Inventory Tracking
Install a computerized inventory tracking system, so that no inventory is lost in the warehouse, in the production area, or in transit. Doing so allows a business to invest in a reduced amount of inventory.
Manage the Bottleneck
Manage the bottleneck operation in the production area as intensively as possible. Doing so maximizes the production of key goods that are needed to increase overall company profitability. Spending management effort on non-bottleneck areas tends to produce a much lower return (if any).