NAME: ISLAM BALARABE GAYA

ID : 1540
DEPARTMENT: business management.

INVENTORY CONTROL SYSTEM.

What is an inventory control system?
Any e-commerce company must have an effective inventory management system. Using an efficient
inventory management strategy will guarantee that you have the proper inventory on hand at the
appropriate moment to meet consumer requests. By reducing the cost of goods sold, an accurate
inventory count system will help your business become more profitable. It will also boost sales
because you'll have enough inventory on hand to fill orders.

Your inventory management process will be streamlined and automated with the aid of an inventory
control system. In this article, we'll explain what an inventory control system is and how it can
benefit your company.

Definition of inventory system

An inventory control system is a piece of technology used to maintain count of and supervise a
company's items throughout the supply chain. This technology will enable the integration and
management of sourcing, shipment, distribution, storage, and returns into a single system.
Many manual processes will be automated by the best inventory control system. It will give you a
precise picture of your inventory, where it is, and when you need to reorder in order to keep your
stock at the right levels.

A company only has effective inventory control, according to Business Link (2006), when there is the
"correct amount of goods in the right place and at the right time" (Business Link, 2006). Ineffective
inventory management might result in sluggish sales and disgruntled customers.
Reducing the overall cost of inventory is the main goal of inventory control. Controlling inventory is
crucial for firms, especially those that deal with a wide range of goods. According to Zenze (2004),
inventory control or management can be used to speed up warehouse operations so that orders and
shipments can be tracked. Inventory management systems have significant uses in manufacturing,
shipping, and receiving.

TYPES OF INVENTORY CONTROL SYSTEM

Systems for inventory control have changed. Earlier systems were essentially just spreadsheets, and
currently machine learning is automating inventory control to a greater extent. Two main categories
of inventory control systems exist.
A Perpetual inventory control system.
Real-time inventory tracking is done using a perpetual inventory control system. A product's barcode
is scanned after it sells in required to eliminate it from a worldwide accounting system. One is
identified and entered into the inventory database when it is acquired. The same database and
information are accessible to all components of the system.

Without the need for human inventory counts, a storage systems offers a highly detailed view of
inventory changes and an accurate accounting of inventory levels. It is appropriate for enterprises of
all sizes and vital for establishments with numerous locations or big sales volumes
A Periodic inventory control system:
A physical count of the inventory is used to update a periodic inventory system at predetermined
times. A company using a periodic inventory system won't be aware of how many products it has
until the physical count is finished. When it comes to fulfilling orders, it is simple to understand how
this could be an issue. And although your companies have a lot was accurate, you now need to
physically inspect your merchandise to see if you have it in order when a buyer makes a purchase.
weeks or months ago.
Manual stock counting requires a significant amount of time and labor. Every single SKU needs to be
counted. A huge store would struggle with this.
Barcode inventory systems.
Systems for managing inventory that use barcode technology are more precise and effective than
those that use manual procedures. When a worker scans a barcode with a barcode scanner or a
mobile device as part of an overall inventory control system, the inventory levels are automatically
updated. There are numerous advantages to implementing barcoding into your inventory
management procedures, some of which are as follows:
precise documentation of all inventory transactions
removing labor-intensive data inaccuracies that typically occur with manual or paper systems
removing errors made during manual data entering
Speed and simplicity of scanning
automatic updates to the amount of stock on hand
Keep track of your transactions so you can easily figure out minimum levels and reorder quantities.
Streamline reporting and documentation
Quickly profitable investment (ROI)
Facilitate the movement of inventory from receiving through picking, packing, and shipping at
various locations and within warehouses.
Radio Frequency Identification (RFID) Inventory Systems
Inventory management systems that use radio frequency identification (RFID) employ both
active and passive technologies. Fixed tag readers are used throughout the warehouse as part
of active RFID technology; as RFID tags pass by the readers, the movement is tracked in the
inventory management system. Active solutions are therefore ideal for businesses that need
real-time inventory tracking or where inventory security has been a problem. On the other
hand, passive RFID technology necessitates the deployment of handheld readers to track
inventory movement. The inventory management software logs the information when a tag is
read. The reading range of RFID technology is roughly 40 feet for passive technology and
300 feet for active technology.
Systems for RFID inventory management come with some difficulties. First off, barcode labels are far
cheaper than RFID tags, hence higher value items are often used for them. RFID tags have also been
reported to experience interference problems, particularly when utilized in situations with heavy
metal or liquid presences. The switch to RFID equipment is also very expensive, and you must ensure
that all of your suppliers, clients, and transportation providers have the necessary tools. Additionally,
compared to barcode labels, RFID tags can transport more data, which could slow down your system
and servers.
You should first determine whether a perpetual inventory system or a periodic inventory system is
more appropriate for your needs before selecting an inventory control system for your company.
Then, decide whether to pair your inventory control system with a barcode or RFID system for a
comprehensive solution that will provide you visibility into your stock and enhance accuracy when
scanning, tracking, recording, and reporting inventory movement.

PARTS AND PERFORMANCES OF INVENTORY CONTROL

The following are the major features of the inventory control system:
specifying goods' types, IDs, and numbers; recording serial numbers of goods;
implementing and controlling barcodes
prioritizing ABC items;
replenishment process;
Keeping track of inventory lists,
legitimate warehouses reports,
tracking the location of items in real-time,
effective inventory management administration,
accounting and fiscal procedures related to warehouse operations,
and coordinating warehouse stock with sales.

Why are inventory system important

You need to have the product available on the shelves when a consumer requests it for your
business to function properly and be successful. The intricacy of purchases, sales, shipping, receiving,
and storage lies beneath this seemingly straightforward statement. This complexity will be
automated and managed by an inventory control system, allowing you to concentrate on other
areas of your business.

Levels of the inventory in real time.

When a product is being sold, bought, manufactured, or returned, a continuous inventory system
will update inventory levels globally. You may assess inventory flow and establish efficient reorder
points with an accurate real-time inventory. Out-of-stock scenarios and excess inventory are
reduced as a result. By preventing backorders, real-time inventory levels enhance customer
connections, and they enhance employee relationships by providing an accurate picture of the
condition of the inventory.

Streamline your logistical process.

You have a complicated supply chain. The process of getting a product to a customer involves
numerous steps. You can track a product at every stage of its journey with the help of an efficient
inventory control system, which will also equip you with the means to identify logistical bottlenecks.
You now have more time to focus on making improvements.

monetary savings
Inaccurate inventory can cost you in a variety of ways. Instead of waiting for a backorder if you don't
have a product in stock, a customer could cancel an order and purchase the item elsewhere. On the
other hand, an incorrect inventory may result in excess stock, which would raise the cost of taxes,
insurance, and storage. By maintaining inventory at the right levels, an inventory control system will
help you save money.

Reduce the accuracy of manual work.

Physical inventory tracking is susceptible to fraud and mistakes. An inventory control system
eliminates human mistake and theft by tracking a product from the purchase order through the
client delivery.

Increase client satisfaction.

With next-day or even same-day delivery options available today, buyers want their goods to arrive
swiftly. A customer may order a product that you indicate is in stock but don't actually have if your
inventory is off. This might lead to a backorder or canceled order, which could result in a disgruntled
customer who might not place an order from your store again.

Any e-commerce store depends on its inventory to survive. Backorders may be avoided, client
satisfaction is maintained, and your firm will be lucrative if you have the proper products in stock. By
automating manual inventory control procedures, optimizing your logistical workflow, and providing
you with a real-time picture of inventory levels, a powerful inventory management system will
handle much of this labor on your behalf.
In the decision-making process for inventory control, there are three main considerations.
1. The cost of holding the stock: this is the ongoing expense of keeping items in storage while
carrying stockpile. This covers interest, taxes, insurance, spoilage, breakage, and storage expenses
including rent and lighting.
2. The price of submitting an order, which encompasses the price of shipment of goods, creating
invoices, calculating how much is required, and moving goods.
3. The loss if there is not enough inventory to satisfy all demand represents the cost of shortage.
When demand outpaces available inventory supply, this typically occurs.
According to Michael (2002), using a computerized inventory management system is the simplest
way to manage inventory. The following systems reduce the amount of time needed for
management of inventory.

Point-of-sale terminals:
 This system provides a more error-free sales transaction and automatically changes the
stock level.
 Barcodes and barcode scanners have proven to be an efficient way to input inventory and
"stock takes" more quickly into inventory and job costing systems, which also automatically
update stock counts as orders are placed.

 Electronic Supplier Product Catalogs: Enables the recording of inventory information on

electronic media like CDs and DVDs.

These systems use electronic and wireless technologies that produce error-free data to guarantee
accurate inventory records. Because they only keep current records of items and remove all sold
items from the system, these systems are very effective.
Periodically reviewing stock reports is a viable option for monitoring product status and spotting
low-demand items.
Check the record on a regular basis to make sure the system is accurate and to compare it to the
quantities of physical stock.

METHODS OF INVENTORY CONTROL SYSTEM

Several techniques exist for inventory control, some of which are listed below (Hedrick, 2010):
Visual control is used to assess the need for more inventory through visual inspection. This
technique, which is most frequently utilized in small enterprises, might not need for any documents.
Tickler control involves routinely physically counting a tiny piece of the inventory.
Using a sheet of paper to record items as they are used and then reordering them is known as "click
sheet control."
Stub control: primarily utilized by shops, it gives price control to managers.
Today's business expansion has made it necessary to create a more complex and analytical form of
inventory management. The inventory management systems mentioned above grew complex and
ineffective. Computerized inventory control systems were consequently introduced. These systems
consist of (Sande, 2003):
Point-of-sale terminals: These are where data about each used or sold item is stored.

Offline point-of-sale terminals: These send sales data straight to the supplier's computer network.
The supplier then employs this data to simply transfer the shops the required goods.

DEVELOPMENT OF INVENTORY CONTROL SYSTEM

CREATING A SYSTEM FOR ITEM MANAGEMENT
A complete list of all the items on hand constitutes an inventory. Raw resources, work-in-progress,
and finished commodities make up inventory. Businesses must have an adequate quantity of stock
to meet client needs at any moment in today's fiercely competitive industry. Supply chain
management includes inventory management. The idea of supply chain management (SCM) has
received a lot of attention in recent years. This method looks at the supply chain as a whole rather
than as a collection of distinct processes.
The systematic and strategic coordination of the conventional company processes is known as
supply chain management (SCM). The primary goal of supply chain management (SCM) is to enhance
both the long-term performance of each firm and the supply chain as a whole (Mentzer et al, 2001).
The "system and practices of maintaining the right level of stock in a warehouse" are part of
inventory management (Barcodes, 2010). These activities include determining the amount of
inventory that is required, developing replenishment procedures, tracking and keeping tabs on how
items and stock are being used, balancing inventory, and reporting inventory status. In essence, it is
the process of effectively managing stock levels in order to prevent excess inventory. Therefore,
effective inventory management will reduce the cost of inventory (Sande).

METHODS OF INVENTORY Management SYSTEM.

There are now two main methods of inventory management:
Planning for materials requirements (MRP): Simply put, MRP is a management system where sales
are translated into loads according to sub-unit and time. Orders in this system are "planned more
carefully, lowering inventory and accelerating delivery times.

predictable" (Hedrick, 2003). (Hedrick, 2003). MPR periodically reviews order quantities and as a
result, only permits ordering what is currently required. As a result, inventory levels are kept to a
minimum. Just-in-Time (JIT): This strategy guarantees that a company should only maintain
inventory in the proper quantity at the proper time with the proper quality. For a greater
competitive advantage, most businesses adapt to this system to incorporate inventory management.
Instead of optimizing inventories, it eliminates them.

An outside organization handles the final method of inventory control. According to Floyd Hedrick, it
entails taking out surplus inventory that can be given back to the manufacturer. To record stock
counts and write reorders, the company's salesperson must visit the retail company on a regular
basis after reaching an agreement (Hamlet , 2006).
The primary goal of the aforementioned systems was to deliver a more effective system that could
determine the cost of each inventory (Hamlet, 2006). The study claims that there are two primary
control values in use:
1. The Economic Order Quantity (EOQ), sometimes known as the order size
2. The reorder point, which is the smallest amount of an item or stock that can exist before more is
ordered.
The Economic Order Quantity (EOQ) formula is primarily used to determine the annual cost of
placing an order for an item. The cost of carrying inventory, the annual sales rate, and the actual cost
of making an order are all factors that are commonly employed by most firms. (2002) (Lysons).

INVENTORY MANAGEMENT SYSTEM IMPACT

Some advantages of inventory management include the ones listed below (Kenneth, 2002):
 Systems for managing inventories can speed up the process of responding to shifting
consumer demand for products and can assist manage excess stock.
 IMS give businesses a way to efficiently manage or control their inventory.
 IMS enables firms to continuously assess their operational procedures, including sales and
buying, to make effective inventory selections.
 IMSs, or inventory management systems, can offer complete transparency into stock trades.
  A good inventory management system can give users practical knowledge of their stock,
which could enhance sales and improve customer service.

WHY MAINTAIN INVENTORY

A comprehensive list of every item in a warehouse or store is referred to as an inventory. Hamlet
(2009) defines inventory as goods kept in warehouses or distribution centers in excess of what a
retailer requires (Inman, 2010).
The reasons why businesses maintain more inventory than they actually need include the following
(Inventory Management, 2010).
1. Satisfy Demand: This guarantees that customers receive the good or service they require when
they require it.
2. Maintain Operations: When, for instance, manufacturers run out of stock to produce a specific
product, the entire production process or operations will be suspended, which will stop the
production of the finished product. The majority of producers buy extra inventory to avoid this.
3. Lead time: The interval between the time an establishment (such as a store or manufacturing
units) purchases a product and when it is delivered is referred to as lead time. However, in order to
maintain operations during the lead period, a business should have on-hand inventory.
4. Hedge: This involves maintaining inventory to guard against increases in the cost of goods. As a
result, the buyer can purchase at a lesser cost than when the price rises.
5. Quantity Discount: A price reduction is a reduction in price for buying a product in large quantities.
The majority of enterprises are always influenced by this to purchase more than necessary, which
may result in excess inventory.
6. Smoothing Requirements: Organizations occasionally purchase access inventory for goods .

Inventory management, as per Zenze (2004), necessitates understanding the following:

The magnitude of the necessary replacement order
Finally, the time at which this order will then be placed and how frequently inventories should be
examined .

BEST PRACTICES FOR MANAGING INVENTORIES

Many organizations invest a lot of money in inventory management systems in an effort to increase
their return on investment (ROI) and prevent excess inventory.

REFERENCE:
https://pub.abuad.edu.ng/Open_Access_Research_Projects_of_Universities_-_Batch_2/COMPUTER
%20ENGINEERING/
DESIGN_AND_IMPLEMENTATION_OF_AN_AUTOMATED_INVENTORY_CONTROL_SYSTEM_FOR_A_M
ANUFACTURING_ORGANIZATION.
https://www.bigcommerce.com/ecommerce-answers/what-is-an-inventory-control-system/
https://www.camcode.com/blog/inventory-control-systems-types/
https://www.leafio.ai/blog/inventory-control/