What are the Policies and Procedures of Inventory Control in a Company?

What are the Policies and Procedures of Inventory Control in

An inventory is the listing and description of all goods in a company, in order to market the products. Inventory control has its benefits, advantages, and disadvantages; But for it to be effective we must define its policies and procedures.

It also refers to, to the raw material in stock, for the creation of new, intermediate or in the process of being finished products; which will be sold, in a period of time established by said company, to users.

But then what method to use to keep an inventory? The first thing is control both the output and the input of the articles that are in the warehouse; It is necessary to establish a record methodically to achieve success.

That’s where inventory control comes in; that is to say, keep a list of the types of articles that come out the most, or which ones remain stagnant and must be mobilized. Depending on the case, we can manage the inventory with the FIFO or LIFO method.

What are the points to take into account for an inventory control?

Some aspects should be taken into account, such as order inventoriesFor example, by ranges according to sales, the quantity must also be defined, either the minimum or the maximum quantity of the product that the company has, to sell and prevent any increase in demand.

man checking inventory control with laser gun

Equally, it is important set the frequency, to carry out the inventory, that is, if it is going to be carried out on a daily basis or permanent inventory, which even if it is done with software, the physical is also necessary to quickly verify if any merchandise is missing; or if it is every week, month, called periodic inventory.

What are the variables to consider in order to design an inventory policy?

There are several variables that must be considered to obtain our planning, for example the costs involved, on the place of the warehouse and the personnel that work in this area, also, those who are in charge of purchases and what perishable items imply, which after expired cannot be sold .

The quality of service, that is, how much the company has complied with the service it has provided to customers, as well as the perspective of the latter, in relation to what they can expect from the company.

Another variable to consider is the time it takes to replace the products so that they are available again, which, depends on the inventory, the time of purchase, how long it takes the distributor to dispatch; as well as how long the transport takes to arrive and finally incorporate it into the system.

Also the natural condition of the product, that is, their limitations in terms of repair, if they last a short time and if they can be consumed: also take into account the demand for the item, to place future orders.

We must know limitations on the part of the distributor, that is, the conditions established prior to the order. Finally, it is advisable to know the difference between absolute inventory and net inventory, to avoid possible losses in the company’s accounting.

Inventory control policies and procedures in a company

work team organizing inventory control

  • The inventory valuation policy, includes three methods, the FIFO that says that the inventory that first entered, must leave, then the LIFO that is contrary to the FIFO and that of the weighted average where they calculate the costs, each new purchase.
  • Keep inventory accounting, that is to say, update it, which can be periodic, once a month, after three months or annually; while the perpetual in each purchase or sale.
  • A physical calculation must also be carried Of inventory, the most common is to count a group of merchandise daily or weekly, which prevents future fraud or theft.

We can conclude then, that keeping an inventory control of a company requires take into account certain aspects and variables, which will facilitate this procedure; without wasting unnecessary time.

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