ARTICLE: The Inventory Control System and Its Considerations

In every company, the registration and control of merchandise have a significant impact on finances because they are processes that will drive to obtain the necessary profits to stay in the market. In addition to that, these control processes allow the organizations to know the flow of certain products, depending on the needs of the different departments. There are several parameters which should be considered by the companies when they set themselves for defining their inventory control system. Various aspects which are essential to address while making the strategy of inventory control system include the processes like providing the invoice about the need of the material or products, the shipping, the process of purchasing and making payments, receiving the material, storing it, and reordering when the need arises again.

The evolution of the value of the merchandise is another element to be frequently reviewed, since it allows the firms to know precisely the dates of re-ups of the cost of each product (in case they have occurred), and they also help to generate statistical analyzes for the managerial meetings of different departments. This practice can help the organizations to make relevant administrative decisions for the inventory management.

The inventory control system is appropriate for every company, as it expects to know the managers if there is stagnant merchandise and when they should make a new investment for it. For example, in the case of perishable products, it should be developed in the short term, while when working with long-lived products, there will be more time. However, this should not be a limitation for executing the general review frequently.

The time with which the managers should do the general review of the products will be checked against what is in the software of the organization for the inventories related to the physical counting of the related goods or products. It is the most real and reliable way to guarantee that the processes are being carried out correctly.

How can the periodicity of the inventory control system be managed?

Within any inventory control system, there are several considerations according to the items the company wants to manage:

  • Cyclic Stage of the inventory

In this stage, a perpetual inventory program is used, which monitors the merchandise received and sold, as well as the one that returns to the store and then to the manufacturer. The fiscal year is continuously executed, without obstructing the daily tasks, in certain areas or sections.

But what does this mean? When carried out randomly, current numerical data are obtained. When using this system, it is necessary to count the items, since having control of purchases and deliveries, there will be a more strong outlook at the end of the year. The companies can do it bi-monthly, quarterly or half-yearly according to their process and policies.

It gives a contribution to the cyclic inventory from a systematic point of view. This also allows the production managers to know real figures of the lost merchandise or about that has incidence in the deduction of taxes. If the managers notice that there are many stolen products, it is advisable to use this physical control very frequently. One of its advantages is that the raw material or merchandise acquired does not enter as an asset, but in purchases, where the returns also fall.

  • Seasonal control over the merchandises

In the case of seasons or changes of time, this control can be done in whole or in part. For example, in the field of clothing, whose trend continually varies and by deterioration, it develops at the end of each cycle. Organizations need to lean on the cyclical inventory when it comes to total counts of the merchandise.

  • Annual periodicity

If the company produces few products, then it can use this system, which is far from the program counts. An area manager does this type of inventory, and the performance bonus depends on the result of this inventory.

Depending on the turn to which a particular company belongs, it must analyze all the factors that help it to determine the most appropriate periodicity to carry out in the whole inventory system. The faster the managers can solve the inventory program, the more time they can allocate to other areas of the company.