Functions & Methods of Inventory Control Every Business Owner Should Understand

3 days ago

In running a frozen food business, an entrepreneur should not only focus on efforts to extend the product’s shelf life but also pay attention to various important factors — one of which is inventory control.

Without proper inventory control, the business may lose customers and even suffer long-term losses.

So, what exactly is inventory control and why is it so important? If you want to understand the ins and outs of inventory control — from its definition, functions, to its methods — read the full explanation below!

What is Inventory Control?

Inventory control, or stock control, is the process of managing a business’s inventory to ensure that stock levels are sufficient and do not disrupt business operations or sales flow.

Typically, inventory control tasks are carried out by the warehouse operations team. However, in some companies, the staff assigned as stock controllers are part of the PPIC (Production Planning and Inventory Control) department.

The responsibilities of inventory control staff include recording incoming goods, data verification, stocktaking (regular physical inventory checks), monitoring storage temperatures (especially for frozen goods industries), and reporting to management.

Also read: Cold Storage: An Effective Solution for Your Seafood Business!

Functions of Inventory Control

Inventory control plays a vital role in supporting business operations, especially in the trade and manufacturing sectors. This is because efficient production processes cannot be separated from the availability of sufficient and high-quality materials.

Here are several key functions of inventory control:

Avoiding production delays caused by late arrival or unavailability of raw materials.
Managing goods according to specifications, identification numbers, and categories, ensuring proper organization and traceability.
Prioritizing the dispatch of goods, especially those nearing expiration or based on order urgency.
Facilitating the restocking process for items that are running low or out of stock.
Supporting strategic purchasing that can generate cost savings and increase profitability.
Ensuring that marketed products meet consumer needs, both in quality and availability.
Providing useful information for departments such as warehouse, purchasing, production, sales, and management to support informed decision-making.

Inventory Control Methods

In general, there are several methods you can apply in inventory control, including:

1. Just in Time (JIT) Method

The Just-in-Time (JIT) method is highly suitable for small and medium-sized enterprises (SMEs). This approach aims to reduce inventory storage by ordering goods only when they are needed.

By applying the JIT method, limited storage space is no longer a barrier. Additionally, the risk of losses due to damaged or expired stock can be minimized, resulting in a more efficient production process.

However, this method requires careful planning and strong communication with suppliers to ensure that there are no delays in delivery.

2. ABC Analysis

The ABC analysis method is carried out by dividing items into several categories based on their consumption value and priority.

In general, this classification includes category A, which consists of high-value and low-volume items; category B, which includes items of medium value and moderate volume; and category C, which consists of low-value but high-volume items.

This method enables companies to concentrate more on the products that contribute the most to profit. However, when applying this method, inventory control staff must be highly meticulous in regularly analyzing the relevance of each item category.

3. First-In First-Out (FIFO)

The process of goods entering the storage warehouse usually does not happen simultaneously, and this affects their expiration dates. Therefore, through the FIFO (First In, First Out) method, items that enter the warehouse first are used or sold first.

This method is highly effective for products with a limited shelf life, such as food items. However, the FIFO method is less suitable for products with fluctuating prices, as it can affect the cost of goods sold (COGS).

4. First-Expired-First-Out (FEFO)

Similar to the FIFO method, the FEFO (First Expired, First Out) approach ensures that items closest to their expiration date are dispatched first. This method helps reduce the risk of products expiring and going to waste.

The FEFO method is particularly suitable for companies operating in retail, pharmaceuticals, food and beverage, as well as any type of goods with an expiration date.

5. Last-In, First-Out (LIFO)

The LIFO (Last In, First Out) method is the opposite of FIFO. In this method, the most recently received items in the warehouse are the first to be sold or used.

Contrary to FIFO, LIFO is better suited for businesses dealing with non-perishable products and fluctuating raw material prices, such as the construction materials industry. Another advantage of this method is the potential to reduce tax obligations during periods of inflation, as the cost of newer goods tends to be higher.

However, this method can affect the accuracy of financial reporting since it does not reflect the actual market value of the inventory.

Also read: Understanding How Cold Storage Works and the Benefits of Its Use

6. Cross-Docking

If you’re looking for an inventory control method that eliminates the need to store goods, cross-docking is one of the solutions. At first glance, cross-docking may appear similar to LIFO, as it prioritizes the shipment of newly arrived items.

However, in reality, this method focuses more on minimizing the use of storage warehouses. Once goods are unloaded from the inbound vehicle, they are immediately sorted and transferred to the outbound vehicle for delivery.

Companies that adopt the cross-docking method usually aim to consolidate products from multiple suppliers and streamline deliveries to smaller distribution units at the same time.

If you’re looking for reliable inventory control services using the cross-docking and FEFO methods, MGM Bosco Logistics is the solution. We are ready to assist you with a fully systematic process — from receiving, storage, picking, and delivery to inventory reporting. We are also committed to ensuring your goods are always maintained at the required temperature.

In addition to choosing the right inventory control method, you also need to pay attention to the quality of your warehouse and delivery logistics. No need to worry because MGM Bosco Logistics offers cold storage solutions with food-grade standards and environmentally friendly technology. We also provide a wide range of logistics services supported by an organized and modern system.

With over 20 years of experience, MGM Bosco Logistics continues to expand its operational reach and has recently established a presence in Palembang, with a cold storage facility that began operating in February 2024.

Today, MGM Bosco is operating a warehouse in Palembang with a storage capacity of 2,500 pallets, equipped with the latest technology for reliable refrigeration systems and warehouse management operations. If you need more detailed information about our services, feel free to contact us today.