Page 132 - DMGT525_MATERIALS_MANAGEMENT

Unit 9: Inventory Control

and quickly be implemented by merely downloading an app. The app is priced as an Notes
affordable monthly fee enabling an almost instant Return on Investment (ROI). There are
no expensive Point of Sale (POS) licensing fees and no heavy investment in POS system
equipment or training regimens.
Control and manage your inventory and you will also be controlling and managing your
business destiny at the same time.
Thanks to today’s affordable technology, you can use POS system features and enjoy the
benefits that enable the easy management and control of every aspect of your business
and related inventory so you capture every possible profit you’re entitled to.

Source: http://www.sitepronews.com/2012/10/09/why-is-inventory-management-critical-for-a-merchant/

9.3 Procedure for Setting up an Effective Inventory Control

An effective inventory control system can be set up by following these steps:
1. Implement policies to limit the amount of people with access to your inventory, and keep
a record of who has access to secure areas at specific times throughout each day. According
to effectiveinventory.com, managers often underestimate the effect of theft on their
inventory costs. Consider installing security cameras and keycard-access points in your
inventory storage areas.

2. Implement fool-proof systems for inventory receipt and storage. Section off designated
areas for each inventory item; clearly label each section and train new employees on the
storage area & layout. Create user-friendly checklists and verification procedures for
employees receiving or making shipments of inventory.
3. Create a plan to take advantage of central warehousing and cooperative purchasing
techniques. Create a formal system to replenish inventory at one location with excess
inventory from another location, when possible, and to combine purchases for several
locations into a single purchase order. This can help you to make fewer and larger purchases,
allowing you to take advantage of quantity discounts and minimize distribution costs
across the supply chain.
4. Estimate demand for each stock item annually. Create demand schedules covering each
quarter or month in the coming year. Take seasonal demand fluctuations into account, and
plan to stock up on seasonal inventory items early. Established companies can use previous
year’s sales figures as a starting point when estimating demand; new businesses may have
to rely on competitors past revenue figures and management expectations for first year
market share. Use these estimates to calculate the ideal re-order points and maximum
stock levels for each stock item.
5. Create a database of all stock items. For each stock item, include information on the item’s
cost, suppliers, current stock level, lead time and inventory classification.
6. Create a notification system to alert employees when an inventory item’s re-order point
or maximum stock level has been reached. Determine the point at which the system
triggers a notification by taking the item’s lead time and recent demand into consideration.
7. Establish policies that ensure the timely processing of all paperwork, including purchase
orders, receipts and inventory counts as quickly as possible to ensure your records are
continually accurate. Establish a manual or computer-aided process to update your stock
database at least daily, covering all inventory receipts, sales and transfers.

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