Inventory control

Millions of dollars are wasted on inventory. When you produce too many products and they sit on the shelves, you aren't making money and it is instead costing your business too much money. One method companies use for inventory control is the method implemented by Toyota. This method involves making products ready to order. Basically this means you will carry a very small amount of inventory on your shelves to fulfill the smaller orders that come in.

Products that are made ready to order are actually quite easy to fulfill as you just need to continue running your operations like normal. As you run the company like normal, a product will be produced that day so you aren't getting behind. When a large order comes in, adjust your staff for the order in order to ensure that it goes out on time.

Although you may get a lower cost per item to produce more for your inventory, it isn't always a great option if you don't have the sales to sustain the product. When you have inventory, it ties up your cash flow. This causes you to have a harder time paying for other needs of the business. Since you need to wait on customers to buy the products, you will be unable to take care of pressing needs like your payroll and even your taxes.

Ordering too much for inventory also leaves you with storage problems. Do you need to add onto a warehouse in order to store the products? If you keep them at your facility, do you actually have enough space to hold large product orders?

Implementing an inventory control method is critical to the success of your business. There are several inventory control methods you need to use, here are some that will start saving your business money:

• Order points. Set inventory control levels. This allows you to see what the maximum level of stock you need to carry is and what the minimum stock level is. When you are introducing a new product, start with a smaller run because carrying too much for a new product will eat up your cash flow. It also leaves you with problems if people don't respond favorably to the new product and you are stuck with it sitting on your shelves. Setting order points allows you to properly manage your inventory as you will know when you need to order more and when you need to push a product more if it is sitting on the shelves and wasting money.


• Warehousing. You will waste a lot of money paying for a storage unit to hold your products. It may be a good idea to consider working with some of your vendors to see if they can warehouse the products for you. This can often be cheaper because you won't need to pay the shipping costs on the products. This practice is commonly used when you are working with printing companies that produce brochures and other things for your company.


• Bin system. Many companies use a bin system when they are focusing on their inventory control. The bin system connects the order and the reorder points for the company. Basically you have your unevenness in the inventory sorted into piles or bins. These bins help to establish the time period between the stock reorder points. With the second bin you will use that for the time period when the order has been placed and you are waiting on it to be received. The second bin really should be used as an "emergency stash" for your company that you want to rely on when you eat into your first bin and through the rest of your existing inventory.