When you’re running an eCommerce business, there are few things more important than managing your inventory. That’s why it’s so surprising that so many businesses still manage their inventory manually or without robust inventory control software. Maybe that’s why as much as 60% of the average company’s SKUs are inaccurate, according to a recent study.
What is an Inventory Control System?
An inventory control system is a system to manage every aspect of an organization’s inventory. This includes purchasing, shipping, receiving, tracking, warehousing, storage, turnover, and reordering. It’s a total inventory management system that impacts nearly every aspect of a company.
Inventory control software brings together separate functions that may be handled by different departments by integrating each of these functions into a cohesive solution. For small companies, it tracks inventory and helps manage re-ordering. For larger companies, it can track inventory, raw materials for production, and the entire supply chain.
Why Do You Need an Inventory Control System?
Inventory control is crucial to your success. If you’re still doing things manually or with basic inventory control software (like QuickBooks or Zoho), you’re likely losing time and money.
Even a small rate of stock loss that goes undetected by businesses can disrupt the inventory management and ordering process. This inventory inaccuracy creates out-of-stock situations that cost you money and frustrate your customers. Lost revenue resulting from out-of-stock situations is greater than the stock losses themselves.
An inventory control system can also help you determine the number of products to keep in stock at your business or warehouse, and what can be ordered quickly when needed. This helps reduce the amount of inventory you must keep on hand and eliminates tying up capital in excess product capacity.
Inventory carrying costs vary greatly depending on the quality of the inventory control system in use. A 2018 study by APQC, “Open Standards Benchmarking Measures in Logistics”, revealed a nearly 11% difference between top performers and poor performers. For a $5 million-dollar company, that difference can account for more than half a million dollars in inventory carrying costs.
An increase in inventory accuracy by as little as 1% is significant. It leads to an increase in on-time order delivery by suppliers, faster “Dock to Stock” cycles, and improved delivery times for customers. It can also reduce holding cost expenses, such as rent or insurance for holding excess stock.
What Are The Signs You Need to Implement an Inventory Control System?
Here are some of the warning signs that signify that you need to implement an inventory control system or upgrade the inventory control software you are currently using:
Sign #1: You’re Still Doing Things Manually
If you’re still doing things manually, you are losing time and money. It’s time to move to a robust inventory control system that can manage your process.
Manual inventory control can lead to inaccurate counts, inefficient supply chains, human error mistakes, and dead stock. It also prevents you from having the correct data you need to make good business decisions.
Sign #2: Getting the Information You Need is Difficult
You should be able to have access to near real-time data anytime you want it. That’s key to ensure your systems and staff are working efficiently. If you have a difficult time accessing timely inventory information, you’ve got a problem.
You should be able to sync your eCommerce sales channels, inventory, and generate reports easily. This data is crucial to maximizing sales and forecasting, managing purchase decisions and inventory, know where your inventory is in every step of the journey, and manage your inventory across marketplaces.
You should be able to instantly track gross profit margins down to individual inventory items. Your inventory control software should tell you when you need to adjust minimum inventory stock levels, which products are selling well, and which ones are moving slowly.
Sign #3: Things Don’t Work Well Together
As companies grow, they integrate different software solutions into their tech stack. Often, they find their existing inventory management system does not integrate with necessary business platforms or accounting systems. This leads to duplicating work. It’s inefficient and can result in errors.
eCommerce sellers are also working across multiple platforms for sales. You need inventory control software that integrates with major platforms, such as:
Sign #4: You Have Difficulty Accessing Information from Locations
Managing inventory across multiple locations, online or physical can be a challenge without a great inventory control system. If you find that your team members have difficulty accessing inventory information across locations, it’s a warning sign. It can lead to sunk costs for managing and moving inventory around, over-ordering, or under-ordering. Complete inventory visibility is key for success.
Sign #5: There are Multiple Backorders
Every time you see a backorder, you’ve got a problem. The customer is ready to buy, but you are unable to fulfill the order right now. That costs you money and might cost you a customer. They’ll likely go to a competitor to make the purchase. If they are happy with the experience, they may never return. That one back-ordered item must cause you to miss out on the CLV (Customer Lifetime Value).
It’s always cheaper to sell to an existing customer than a new one. Loyal customers are 5X more likely to purchase again and 4X more likely to advocate for your brand than new customers. Lost sales – and lost customers – mean increased customer acquisition costs (CAC).
Inventory management software helps you avoid canceled orders.
Sign #6: There are High Inventory Write-offs or Holding Costs
If you are dealing with high levels of inventory write off, it’s time to re-evaluate how you are managing your inventory. Likewise, if you have high holding costs relative to total inventory value, you are tying up cash which you might better use in other areas.
Real-World Examples of Inventory Control Systems
Home Depot has more than 2,200 stores and manages 200 distribution centers. Its goal is to reach 90% of the U.S. population with same or next day delivery for products, including big or bulky goods. As both a brick-and-mortar seller and an eCommerce seller, the company cites its inventory control system as a key component in projecting sales of $115 billion for 2020.
When a supplier for Toyota had a fire that destroyed brake valves on their way to the automaker, it forced the company to shut down manufacturing for two days. They estimate it lost $15 billion and delayed the production of more than 70,000 vehicles. Toyota has since become one of the world’s leaders in implementing inventory control management systems.
It’s not just these large companies that have implemented inventory control systems and improved efficiency. Small and medium-sized businesses have also found great benefit to a central inventory control software. According to Deloitte, 79% of organizations that have high performing inventory management software demonstrate consistently higher revenue than their competitors.
Whether you are in Apparel & Fashion, Automotive, Food & Beverage, Health & Beauty, Home Goods, or Toys & games, an inventory control system can streamline your operations, fulfill orders more quickly, prevent errors, and reduce operating costs.
Interested in learning more? Here are a few more resources we think you’ll like!
- Never Cancel an Order Again With Inventory Management
- Avoid Supply Chain Software Failures With Inventory Management
- How is Excel Spreadsheet Inventory Management Working For You?
Ready to implement an inventory control system? One of our knowledgeable sales consultants is ready to walk you through exactly how SkuVault can benefit your business and answer all your questions about how our powerful Warehouse Management System can help address the needs of your unique business.