Controlling Inventory Levels In A Business: Why Is It Essential?

In its second year, the pandemic is taking its toll on the global economy and the impact on businesses has not been long in coming as they struggle to regain their inventory levels.

We know that maintaining an optimal level of inventory is critical to the survival of businesses. Therefore, we prepare this article for you on the importance of stock control and the main keys to managing stock levels.

Impact of the pandemic on stock levels

Contrary to what happens in most economic crises, the pandemic caused an inventory deficit between major global supply chains. And it is not for less, because, unlike other recessions, this time production stopped suddenly:  

2020  

COVID-19 is declared a health emergency due to force majeure.  

The suspension of work and company closures abruptly stop production globally.

2021 

As restrictions relax and economic recovery proceeds, demand for industrial products soars, but supply cannot keep up. Companies reopen their doors with low inventory levels, relative to their orders.

The industries that did not suffer a drop in their production are food and health.  

Additionally, global supply chains are blocked by hoarding by some large companies. What they do is acquire basic supplies, to manage possible supply shocks.

Importance of inventory control  

Whether you manage an SME or a transnational company, you surely agree with us: inventory control is a vital activity for any business, as it supports the purchase and sale of products and services.  

Inventory control is the management of raw materials and goods through two major processes that companies need to perform:

Inventory management 

It is the daily and productive handling of the merchandise, to respond to the needs of the company. For example, using barcodes, classifying the stock, and properly distributing the goods in the warehouse, can be done with the help of an expert team of CAC.

Inventory optimization 

One step beyond management, optimizing your stock is achieving the best possible financial results, reducing inventory costs. It involves calculation and analysis tasks, such as setting the reorder point and the minimum and maximum stock levels.  

That said, let’s see now why you need to keep your stock levels adequate, both in times of crisis and in periods of economic growth.

Inventory levels and their impact on the business 

The optimal stock is the number of goods that a company needs to satisfy its demand, without causing a lack of stock and keeping warehouse costs to a minimum.  

In other words, by determining the optimal amount of stock for each of your products, you avoid lost sale or opportunity cost, as well as excess products:

Opportunity cost: When a buyer does not find the product they were looking for in your store, you not only lose a sale, but also a customer, the rupture of stock makes you cast your customers into the arms of the competition.  

Excess inventory: The other side of the coin is the surplus of stock, which entails financial and logistical costs, as well as losses due to what is a loss of merchandise.

Our advice for you is to contact CAC and take the help of experienced personnel in this field

as only they can assist you in dealing with inventory problems in the best way and ensure the growth of your business.

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