One of the most disappointing experiences you can give your customers is telling them an item they want is out of stock. That’s why stock control is so essential for any business that sells its products to consumers, either directly or through a distribution network.
If a business cannot fulfill purchase orders regularly, it runs the risk of losing customers. Whether it’s something minor, like a bakery never having enough of your favorite cookies, or a more urgent situation, like a pharmacy being unable to fulfill a prescription, these are red flags that consumers do not miss.
Whether your business is online or in stores, stock control is necessary for customer satisfaction, cost optimization, and smooth supply chain management (SCM).
Optimized stock control also adds value by minimizing your losses due to stock-outs, damaged or expired goods, and production or distribution delays.
In this article, we will delve into how you can get the maximum value from your inventory.
Stock Control: An Essential Process
If you’re unfamiliar with the ins and outs of inventory management, you might be wondering, “What is stock control?”
Stock control is the process by which a business accounts for all its stock. Given that the terms “stock” and “inventory” are often used interchangeably, another term for stock control is inventory contr
Stock control is a must-have for any retailer in order to:
- Track which items are selling faster than others
- Meet orders on time and increase customer satisfaction
- Fine-tune logistics and supply chain operations
- Avoid inventory shortages
Stock control exercises also yield insightful data that you can use to develop short and long-term business strategies.
However, despite the importance of stock control, not enough businesses have harnessed its potential. Studies have shown that 43% of small businesses lag behind in stock control measures. Some still rely on manual methods for tracking their stock or, in some cases, do not track it at all!
But, once you understand how stock control can help transform your business for the better, you will agree that it is an essential process that should never be overlooked.
Stock Control Vs. Stock Management
Quite often, stock control and stock management are mistaken for one another. These are two very closely interlinked processes, but while they have a shared purpose, they differ in scope.
Stock control is only concerned with the stock you are currently holding. The aim is to track every item in the inventory as accurately as possible. Meanwhile, stock management is broader in its scope. It involves forecasting future demand and arranging for timely restocks from suppliers.
Stock control involves knowing where your stock is; stock management is about knowing how you will acquire the stock you need and in what quantity for your business to function. These processes work together to ensure that your company’s inventory is in the right place at the right time and easily available for customers.
Other Aspects of Stock Control
Some essential aspects of stock control include the following:
- Fixed Assets: This is a category of asset that is separate from your production stock and finished goods. Fixed assets are typically used in your production processes and include items such as machinery and equipment. Their maintenance and upkeep represent a hidden cost that some business owners sometimes overlook.
- Warehouse Management: Used to make stock easy to find in storage, optimize shipping operations, reduce storage costs, and make the best use of available space across your warehouses.
- Stock Control System: A technological solution that lets a company track its goods accurately during their entire movement through the retail supply chain and automates manual processes like stock-taking.
Understanding these concepts will help you better grasp the finer points of stock control.
Stock Control Systems
While the term stock control system usually implies a technological solution such as inventory management software, this wasn’t always the case. Before digitalization made stock control a simple matter of tracking goods via the cloud, manually taking stock of the entire inventory was the widespread stock control system.
Thankfully, this outdated and error-prone system is being phased out in favor of technology. In fact, 72% of the retailers included in Zebra’s Retail Vision Study declared their intention to invest in automation for inventory tracking and supply chain management.
The main types of stock control systems commonly used today include:
Periodic Inventory System
This method involves taking stock of the inventory at periodic intervals. It’s a relatively low-tech system for stock control since it does not involve remote scanning or advanced inventory management software. This is one of the reasons why the periodic inventory system is so popular with many small businesses. The one major drawback of this system is that since stocktaking is usually conducted manually, there is more room for human error.
Perpetual Inventory System
Inventory is dynamic, with levels constantly rising and falling depending on the rates of shipments coming in from suppliers and customers buying products. Though this makes it harder to track, a fast-moving inventory is a sign your business is doing well. What’s needed at this point is a system that is as dynamic as the stock levels themselves: Enter the perpetual inventory system.
This system continuously tracks stock levels and automatically posts updates regarding their movement. Today’s perpetual inventory systems use tools like barcodes and remote frequency identification (RFID) tags to make following the movement of products easier.
However, relying solely on readings and scans might paint an inaccurate picture of your actual stock numbers if goods were lost or damaged while still accounted for under the perpetual inventory system.
Methods of Stock Control
There are multiple methods of stock control, each outlining a different method of procuring, distributing, and eventually selling your business inventory. Here are some of the most commonly used methods:
- First In, First Out (FIFO)/Last In, First Out (LIFO): In the first method, goods procured earlier will be sold first. In the second, goods that were acquired more recently are sold before older stock.
- Just in Time (JIT): In this method, a business acquires stock only when it is needed according to its production schedule.
- Vendor-Managed Inventory (VMI): This method involves a third-party vendor who manages and owns the inventory up until the point of sale.
- Economic Order Quantity (EOQ): An approach where every inventory order is calculated to optimize warehouse space and optimize production costs.
Benefits of Conducting Stock Control
Stock control is one of the most effective ways to get the most out of your inventory. There are many benefits you can expect with strategic stock control measures. Let’s look at some of the most impactful ones.
1. Customer Satisfaction
Ensuring that your customers are satisfied is undoubtedly the most important outcome of efficient stock control. Stock control enables you to always make your goods available to customers who demand them.
2. Fulfillment Efficiency
Along with processes like stock management and warehouse management, stock control ensures your logistics operations run smoothly. It also helps you plan your distribution network in such a way that any orders can be fulfilled in the quickest time possible.
3. Cost Savings
Many business overheads can be reduced with smart stock control measures. Paying attention to stock control can help reduce carrying costs, storage costs, lost value, and transportation costs.
4. Inventory Accuracy
To make important decisions regarding inventory, you need reliable information. Stock control also acts as a data-gathering exercise, and the findings from your observations can be used to make forecasts about future demand and replenishment orders. With an accurate system tracking your inventory, there are fewer chances of you accumulating stock that will be hard to sell.
5. Reduced Stock-Outs
Stock-outs are embarrassing for any business. Not only does it lead to you missing out on a sale, but it also invites the possibility of your customer moving on to a better stocked competitor. One of the best things about comprehensive stock control measures is that they drastically reduce the odds of you running out of goods while demand is high.
In Summary
Stock control is an essential business process, whether you operate in e-commerce or physical retail. It benefits businesses and customers alike. With technology, it has become possible to adopt perpetual inventory systems that enable constant tracking of stock movement.
Effective stock control also positively affects other areas of the business, like inventory management, customer relations, and logistics.
Stock control essentially gives you the power to decide how to best deploy your inventory to meet your business goals.
