Inventory control:

Welcome to inventory control basics.

By the end of this video, you will be able to identify the importance of inventory
control in meeting customer demand and describe how inventory control optimizes
inventory investment and manages seasonal and demand variations.
It is essential to grasp these topics to better understand inventory control.
Let's get started.
Effective inventory control is not just important,
it's the lifeline that keeps businesses thriving in the face of customer demand.
Imagine a dance where every step is perfectly choreographed,
ensuring the right products are always ready to take center stage.
By meticulously managing inventory levels, organizations unlock the power to deliver
on customer orders with lightning speed, reducing those agonizing wait times and
leaving customers beaming with satisfaction.
Late deliveries can lead to financial penalties, while excess inventory incurs
costs such as carrying costs, storage expenses and potential obsolescence.
Thus, maintaining a balance is essential to meeting customer demand efficiently.
Plus, it is unlikely every stockkeeping unit SKU can be reviewed daily.
Hence the importance of establishing rules and
methodologies to create alerts and actions to mitigate such instances.
Inventory control also helps prevent stockouts,
which occur when demand exceeds available inventory.
Stockouts can result in lost sales, dissatisfied customers and
damage to a company's reputation.
By monitoring inventory levels and implementing effective replenishment
strategies, organizations can minimize stockouts and minimize backorders.
This requires setting appropriate inventory targets and establishing
a tolerance level for stockouts based on factors such as customer demand,
its variability, lead times, potential for alternatives and supply chain constraints.
For instance, imagine a small grocery store that wants to optimize its inventory
management to ensure shelves are always stocked, but
without overstocking and wasting products.
To achieve this, the store's Supply Chain analyst studies customer demand patterns,
lead times from suppliers, and
the variability in demand due to seasonal changes or promotions.
Based on this data, the analyst sets specific inventory targets for
each product category, such as cereal or canned goods.
They also established a tolerance level for stockouts, indicating the maximum
allowed number of times a product can be out of stock before it becomes a concern.
By carefully balancing these factors, the store can maintain a well managed
inventory that meets customer demands while minimizing waste and stockout risks.
Balancing inventory investment is another critical aspect of inventory control.
Excessive inventory ties up capital and incurs carrying costs,
while insufficient inventory can lead to missed sales opportunities and
higher costs associated with expedited shipments and penalties.
Effective inventory control strikes a balance between these unwanted extremes,
optimizing the investment in inventory while ensuring adequate availability.
Collaboration takes center stage as cross functional teams and
key stakeholders unite, crafting specific inventory management goals and
objectives that result in a seamless dance of efficiency and success.
Collaboration should extend beyond initial goal setting.
It's important to foster a culture of continuous improvement where teams
regularly evaluate inventory management processes, identify areas for enhancement,
and implement innovative solutions.
Inventory control helps organizations manage seasonal demand fluctuations and
variations in customer demand.
It's a dance that requires finesse and precision.
By analyzing historical data, demand variables, and market characteristics,
organizations can adjust inventory levels, plan production schedules, and
align their supply chain accordingly.
Collaboration with sales and marketing teams is crucial to gather insights on
anticipated customer demand and promotional activities.
It is also important to closely monitor the impact on procurement.
This proactive approach enables organizations to optimize their supply
chain operations and enhance customer satisfaction.
In conclusion, inventory control is the backbone of supply chain management needed
to balance customer demand, optimize inventory investment, reduce stockouts,
improve supply chain efficiency, and manage costs.
Effective inventory control requires the establishment of inventory policies
that align with organizational goals and customer requirements.
Organizations optimize inventory management by striking the right balance
of clear guidelines and parameters, avoiding the pitfalls of excess inventory
or shortages while keeping customers satisfied and costs in check.