Controlling Inventory. How hard is it Really?

Blog by Fuel Accountants

Inventory often accounts for a large portion of your business's current assets. Knowing how much to have on hand is a complex task. The very best of forecasts are seldom accurate and occasionally unforeseen problems do occur.

Inventory management impacts different functional teams within the organization. Each team will have competing priorities and differing needs regarding inventory levels.

Manufacturing staff will be looking to streamline processes to increase the efficiency of plants and machinery. While at the same time, the activities of the sales team can result in short-term delivery commitments and frequent rescheduling of the production plan.


Warehouse managers will often hold a supply of safety stock to ensure goods are on-hand, and to protect against stock-outs. This is in opposition to senior management's objectives to reduce expenditure and increase the liquidity of the organization.

Add to this the external factors that potentially impact inventory, such as fluctuations in the supply and quality of goods or variations to delivery lead times. All the while, your customer’s tastes, and demands are constantly changing.

Controlling uncertainty

While there is no way to control uncertainty, you can plan for it and there are steps you can take to minimize its impact.

Five ways to take control of and optimize inventory flow:

1. Employ Intelligent Demand Forecasts

How dependable is your data? Keep good records. Have systems that utilize reliable historical data and sales information to produce more accurate forecasts. Incorporate and integrate plans from cross-functional teams for best results.

2. Know what you have and where it is kept

How many widgets do you have in stock, in what varieties/size and where can you find them? A well-managed warehouse or storage system should make it easy for staff to know quantities on hand, to quickly locate items, and accurately record stock movements.

3. Use your space efficiently

Is it easy to access high-turnover or perishable goods? Improve the layout of your or store to optimize the inward/outward flow of inventory. Have a fixed location storage system with clearly marked positions for stock-keeping units.

4. Rethink order cycles and quantities

Can you reduce the size and frequency of stock orders? Smaller, more regular deliveries will free up space and minimize the risks of potential waste. Reducing the dimensions of an order has the potential to provide savings in the cost of transportation.

5. Keep good records

Are your widgets on the shelf or on the loading bay? Ensure that records can be trusted to correctly reflect physical inventory. Product barcodes, information, stock counts, and movement should be timely and accurate.

Take the difficulty out of inventory control

Do each of the functional teams in your organization have access to the same information? Perhaps one of the basic, but often overlooked elements of inventory management is communication. Between teams and within teams. This is particularly important when areas of the organization are in different locations.

It is impractical to expect interpersonal communications every time there is a movement of inventory. However, an inventory management system that provides reliable information has the ability to communicate this both remotely and in real-time, benefitting all functional teams.

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