One Type of Inventory Control System
For a lot of companies, inventory is their most valuable asset. Not having enough inventory when customers are willing to purchase can be very expensive. This type of expense or cost is known as a stock-out cost. On the other hand, having way too much inventory has its own type of cost, known as a carrying cost. This cost happens because it costs money to store inventory. In addition, inventory on the shelves represents money that could be used in other parts of the business; or it could even be invested to make a profit. Having an inventory control system is important to minimize both types of costs.
A good inventory control management system will keep you up to date on where all of your inventory is. If you know how much inventory you have on hand, how much you expect to sell, and how much more is on its way, then you’ll be in a much better position to minimize both stock-out and carrying costs.
In the past managers tried several different methods to keep track of their inventory. First they simply used pencil and paper. When an item was sold, the bookkeeper took note of it. At the end of each day, the books were compared against a physical count. Any difference was usually considered shrinkage, meaning it was probably stolen by an employee or customer (another good reason to keep track of your inventory). Pencil and paper worked fine for some companies, but for others it was too time consuming and it became almost impossible to keep track of everything.
Fortunately for these companies, the computer was invented. Now every time a sale was made, the clerk would manually enter in what occurred in the computer. At the end of the day, the computer automatically tallied up the ending inventory. Managers could then do a physical count and compare the numbers.
Nowadays, instead of manually entering in what inventory was sold, companies use barcodes. Barcodes can be scanned which saves a lot of time in manual entry. In addition to saving time, the barcodes increase accuracy dramatically. Let’s just say that any time you are dealing with data-entry you are going to have errors. Once barcodes are scanned in, the inventory control system software automatically updates inventory levels. You can even get the software to automatically tell your vendors to ship more inventory when supplies drop below a certain level.
What does a barcode system consist of?
This system consists of a barcode reader or scanner (the red light you see at the grocery store). These can be quite expensive depending on how many you need. You’ll also need a barcode printer, the actual barcodes, and software that keeps track of the inventory and notifies suppliers if necessary.
Today, the barcode system is the most popular type of inventory control system. It is relatively inexpensive and it gives managers information they need to make optimal inventory decisions.
