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Written by Cecilia Chee, Singapore   
Tuesday, 04 October 2011 17:30



Inventory Control Methods

inventory control methods




Are you looking for methods to control your inventory? Well, it sure is your lucky day because you are in the right place.
Below, we will share the most popular ways that inventory is tracked.


1- Managing Inventory by the Min-Max System

min max inventory control
The min-max system works by simply setting (you guessed it!) a minimum and maximum level quantity of inventory for any particular item.

When an item is running low, you order more before it hits your predefined minimum. The new order, however, must not put inventory above your maximum level.

Basically, any amount of inventory between your minimum and maximum is good and you achieve an equilibrium.

While this method is simple, it leaves allot of room for error and you are still required to calculate minimums and maximums for each product.

2- The Two Bin System for Inventory Management

two bins inventory management
The two bin system involves using one main bin for inventory with a second bin as backup. When the stock runs out of the main bin, you place a new order and start picking from the reserve bin.

This way, you always have stock on hand and it would be unlikely to run out even through a time of increased demand.

Again, this method seems quite simple, but you have to be very careful not to have too much of your cash tied up into inventory.


3- Inventory via the order-cycling system

cyclic ordering mangement
In the order-cycling system of managing inventory, you set a predefined time interval (every 20 days for example), do a physical count and re-order for items that you believe will  run out by the next count

While this might work if you are a convenience store owner, it is hard to recommend this control method simple because of the arbitrary nature of it. There is little room for error and it gets very costly and tedious doing a physical count so often.

4- Doing an ABC Analysis to Manage inventory

abc inventory system
An ABC analysis method is another way to organize your inventory. With this method, you categorize your products into categories according to their cost. The most expensive would go into category A and least expensive would go into category C.

While this is just the oversimplified explanation of it, you still would need inventory management software that would enable you to organizes the above information into meaningful reports.



Last Updated on Wednesday, 05 October 2011 13:33
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