The Top 2 Inventory Management Techniques
Inventory management techniques can save your business thousands, even
millions of dollars. There are several inventory related metrics that,
when properly evaluated, help you determine the level of success of your
inventory control.
All inventory management techniques fall into one of two stock control methods: minimum stock levels and stock review.
Minimum Stock Levels
Minimum stock levels are a process by which management sets a minimum stock level or re-order point (ROP). When the number on-hand reaches or drops below the ROP, an order is generated. This can be done through a manual process or generated automatically by inventory management software.
Stock Review
Stock review is a regular analysis of stock versus projected future needs. This can be done through a manual review of stock levels or as part of the demand analysis forecasting by ERP/MRP automated ordering.
In businesses where manual inventory management techniques are still in use, the primary inventory control methods include*:
- visual control
- tickler control
- click sheet control
While the terms originally applied to small scale inventory management, large businesses use automated versions of these tried and true inventory management techniques. Properly used, they help organizations track their usage and ensure timely reorder of stock, avoiding costly outages.
Visual Control
Visual control originally referred to inventory small enough that the purchasing/inventory manager can physically see the critical supplies. When supplies are visibly lean, he or she orders. Visual control in larger en
Tickler Control
Tickler control is slightly more involved, with the manager or a designee counting a portion of the inventory daily, ensuring a 100% inventory every so many days and ordering anything that is unacceptably low.
Click Sheet Control
Click Sheet Control is a manual tracking of sales or usage. By recording usage, it provides reorder data. Some of the most advanced Point of Sale systems are an electronically managed and monitored click sheet control system.
For larger enterprises, an information system executes visual, tickler, or click sheet control but on a much more massive scale. The term "visibility" still applies to being able to check virtually for an item in a locator file.
In all enterprises, these inventory management techniques include processes such as systemic rotating cycle count and automatic inventory orders when the system count reaches a certain level. In modern retail environments, Point of Sale systems offer the same result as click sheet control, but scalable across such enterprises as Wal-Mart and other international retailers.
* "Inventory Management", Henrick, Floyd et Al, US SBA, Publication MP 22 available at: http://www.sba.gov/idc/groups/public/documents/sba_homepage/pub_mp22.pdf
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