Having a reliable inventory control system should be at the forefront of any product distribution business or organization. An inventory control system is very important because it has an immense impact on sales and we know that sales determine profits. A balance has to be maintained on all inventories purchased or manufactured. You will need to ensure that you do not overstock or understock your products at any one time. Here, we are going to look at why inventory control is so important to your business:
Facilitates continuous supply
As a product distribution business, it is very important that you are always prepared to meet the constant demands of your customers. This consistency in supply will help you gain your customer’s loyalty. It will also help your business build a good reputation for itself. The last thing you would want to happen to your business is losing customers because of inability to supply them with the required products. With an inventory system, you are able to record the product name, the quantity and also the rate at which they are being supplied to customers. This will enable you to make a forecast of how much of a product you will require to meet its constant demand.
Wastage of products is common among many companies and business organizations. This is usually caused by over-purchasing products. Some products usually deteriorate or become outdated over time. Imagine having an array of such products in your store. This may cost you thousands or even millions in losses as some may have to be discarded. Having such an issue clearly shows that one does not have a proper inventory system. With an inventory system, you would have been able to know that the product you are purchasing is already in plenty in your store.
Fraudulent activities are rampant in many businesses and especially those dealing with the procurement of products. Businesses purchasing and distributing thousands of products sometimes do not even bother to take a count of the products. This usually provides an opportunity for some workers to take one product out for every purchase or supply. Without a proper inventory system, you will be unable to detect this since the absence of one product among thousands of others is very insignificant and unnoticeable. This may be a constant behavior from your supplier and may go on for a very long time. You will end up losing a lot of money over time without even noticing. It is important to have an inventory system so as to detect this fraudulent act by either your supplier or employee. You will then be able to take immediate action to prevent further loses.
Stock replenishment decisions
Stock replenishment decisions involve knowing the number of products you need to purchase and at what time you need to purchase them. This is very important and necessary so as to be able to meet demand. With an effective inventory system, you will be able to get the constantly demanded products on time and also reduce the purchase of the less demanded products.
Storage cost reduction
Products stored in your store require constant maintenance. You may have to spend some money to ensure that they are well-kept and functional despite them not having demand. This cost is usually called storage costs. To reduce this cost you will need to have an inventory control system. The system will enable you to make the proper budget of the cost in advance and also find ways to reduce it. This can be done by limiting the purchase of un-demanded products that take up a lot of money when it comes to maintenance and storage.
Eliminate duplication of orders
Duplication of orders simply means purchasing a product twice by different departments within an organization. Returning the products may be difficult or can even be denied as it may be regarded as an act of negligence or carelessness on your organization’s part. An inventory system can help solve this issue by allowing only a certain department or person to carry out this function.