These are strategies and techniques that allow efficient management of products and items in a warehouse. Inventory control methods serve to manage the company's stock in the most optimal way possible. Keep reading and find out which are the most commonly used.
The warehouse is one of the most important places for the existence of the business, so balancing the inventory is always a great challenge. However, knowing the inventory control methods helps to choose the one that best suits the needs of the company, helping in the management of its products.
Control methods vary depending on the particular characteristics of each organization. However, they are all aimed at obtaining benefits in the operational dynamics of the company . Therefore, it is important to discover what they are used for.
What are inventory control methods used for?
Failure to ensure optimal inventory management and control can directly affect a company's operations, generate financial problems, and even conflicts with customers. Therefore, it is very important to know how to select and use the ideal method for effective inventory control.
When inventory stock is managed correctly, companies can know which products are selling the most, in order to take early action and ensure adequate supply, avoid unnecessary excess inventory and possible economic losses, as well as reduce operating costs .
Inventory control methods help achieve business objectives and depend on the activities carried out by each company. In addition, to select the most appropriate method, the complexity and volume of operations generated by the business must be taken into account.
Find out more about this topic by reading: Why is inventory control important?
What are the most commonly used inventory control methods?
In order to achieve the objectives of facilitating stock management and minimizing possible errors, there are several types of Inventory Control Methods, which serve to respond to the nature of the organization. Among the most used, the following stand out:
FIFO (First In, First Out)
This method is also known as FIFO (first in, first out ). As the name suggests, the first items to enter the warehouse must be the first to leave, prioritizing the delivery of the oldest items. With this principle, the warehouse will renew the stock and minimize the risk of losses.
This inventory control strategy can prevent products from deteriorating due to environmental factors such as light, dust, humidity and temperature. It is generally used to control the stock of items with an expiration date, including food, medicines and cosmetic products.
LIFO (Last In, First Out)
It is also known as LIFO ( last in, first out ). This method consists of removing cpa email lists merchandise that has recently arrived at the warehouse. It is very useful in small and medium-sized companies, because they do not have a large volume of products and the turnover is usually high. It is only used if the products do not expire.
By applying this method, the replacement costs of products are reflected more accurately because they are based on the latest purchase prices. This method helps the company pay less taxes, since the stock is valued at more recent costs, thus reducing the base on which taxation is calculated.
CEP (Economic Order Quantity)
It is considered the simplest method for controlling inventories and is also known as EOQ (an acronym for Economic Order Quantity ). It is used to know when products must be replenished in the warehouse and what the exact quantity will be. To do this, it is calculated based on demand and stock.
The CEP considers that the costs of ordering products and maintaining them in inventory should be equal. In this way, it serves to control the items, taking into account operational and financial costs. In this way, it determines the order quantity that will help minimize total inventory costs.
Just in time
The principle of this methodology is to keep the smallest amount of products in inventory to avoid waste and losses. Its main objective is to reduce the costs of stock in the warehouse, acquiring the products at the exact moment they are required. For it to be effective, the company needs a supplier that responds quickly.
This method of control works permanently. It is useful when logistics uses a storage time of no more than 24 hours. However, it is important to ensure frequent supply to meet demand, because the company could run out of stock at any time.
What is the ABC method?
This is the most widely used method. In the system called ABC Method ( Activity Based Costing ), the products with the highest inventory volume should be the ones with the lowest cost. It is used to classify and organize products based on their importance, economic value, and turnover.
This method is classified into three categories and the characteristics of each of them are broken down according to the criteria and particular needs of the company, as detailed below: