How will strengthening the management of commodity turnover level help reduce the loss of commodity value?

Definition of inventory control

The meaning of inventory control

Correct understanding of "inventory control"

Classification of inventory management models

The 1.5 times principle of inventory management and inventory turnover

Definition of inventory control

Inventory Control is the entire process of production and operation in the manufacturing or service industry. Manage and control various items, finished products and other resources to maintain their reserves at an economically reasonable level. Inventory control is a business method that uses inventory control methods to achieve higher profits.

Inventory control is an important component of warehouse management. It controls the inventory level of the enterprise on the premise of meeting customer service requirements, and strives to reduce the inventory level as much as possible, improve the efficiency of the logistics system, and improve the market competitiveness of the enterprise.

Inventory control should consider the following aspects, sales volume, arrival cycle, purchasing cycle, special needs in special seasons, etc.

Inventory needs to be controlled using information technology. Every purchase must be recorded. There must be an inventory function. The value of the inventory rises and falls in sync with the market. There must be a production plan, and procurement must be arranged according to the production plan and procurement cycle. . Carry out part cost accounting, save rewards, manage suppliers, prices and services, balance procurement, and maintain everyone's competition to get high-quality services and low prices.

[Edit this paragraph] The significance of inventory control

(1) The role of inventory control

Mainly: on the premise of ensuring the production and operation needs of the enterprise , keep the inventory at a reasonable level; grasp the dynamics of inventory, place orders at the right time and in the right amount, and avoid overstocking or out-of-stock; reduce the occupation of inventory space and reduce the total inventory cost; control the occupation of inventory funds and accelerate capital turnover.

(2) Reasonable control of inventory

Problems caused by excessive inventory: increased warehouse area and inventory storage costs, thereby increasing product costs; occupying a large amount of working capital, It causes sluggish funds, which not only increases the burden of loan interest and other burdens, but also affects the time value and opportunity returns of funds; causes tangible and intangible losses of finished products and raw materials; causes a large amount of idle corporate resources, affecting their rational allocation and optimization; and covers up It solves various contradictions and problems in the whole process of enterprise production and operation, which is not conducive to the improvement of enterprise management level.

Problems caused by too small inventory: causing a decline in service levels, affecting sales profits and corporate reputation; causing insufficient supply of raw materials or other materials in the production system, affecting the normal progress of the production process; causing long order intervals Shortened, the number of orders increases, which increases ordering (production) costs; it affects the balance of the production process and the completeness of the assembly.

[Edit this paragraph] Correctly understand "inventory control"

When talking about the so-called "inventory control", many people understand it as "warehouse management", which is actually This is a big misinterpretation.

The traditional narrow view believes that inventory control mainly focuses on the inventory, data processing, storage, and distribution of materials in the warehouse. Through the implementation of anti-corrosion, temperature and humidity control and other means, it is possible to maintain the best physical inventory in storage. The purpose of optimal condition. This is just one manifestation of inventory control or can be defined as physical inventory control. So, how to understand inventory control from a broad perspective? Inventory control should be to achieve the company's financial operation goals, especially cash flow operations, by optimizing the entire demand and supply chain management processes (Supply Chain Management Processes, DSCMP), reasonably setting ERP control strategies, and supplementing them with corresponding information processing Means and tools can be used to reduce inventory levels as much as possible while ensuring timely delivery, and reduce the risks of inventory backlog, scrapping, and depreciation. In this sense, physical inventory control is only a means to achieve the company's financial goals, or just a necessary link in the entire inventory control; from the perspective of organizational functions, physical inventory control is mainly the responsibility of the warehousing management department. Inventory control in a broad sense should be the responsibility of the entire demand and supply chain management department, and even the entire company.

Why do many people still only understand inventory control as physical inventory control? The following two reasons cannot be ignored:

First, our company does not pay attention to inventory control. Especially for those enterprises with relatively good profits, as long as they make money, few people will consider the issue of inventory turnover. Inventory control is simply understood as warehousing management. Unless there is no money to spend, someone may look at the inventory problem, and the result is often very simple: too much purchasing, or the warehousing department has not done a good job. .

Second, the misleading of ERP, especially the misleading of some domestic so-called ERP. Some simple purchase, sales and inventory software are brazenly called ERP. Enterprises can reduce inventory by using their so-called ERP. It seems that inventory control can be achieved by relying on their small software. Even the world's leaders in the ERP field, such as SAP and BAAN, define simple warehouse management functions as "inventory management" or "inventory control" in their functional modules. This makes us who don’t quite understand what inventory control is, let alone what inventory control is.

In fact, understanding inventory control from a broad perspective should include the following points:

First, the fundamental purpose of inventory control. We know that the two key assessment indicators (KPI) of the so-called world-class manufacturing are customer satisfaction and inventory turnover rate, and this inventory turnover rate is actually the fundamental purpose of inventory control.

Second, means of inventory control. To improve the inventory turnover rate, it is not enough to rely solely on the so-called physical inventory control. It should be the output of the entire demand and supply chain management process. In addition to warehousing management, this large process is more important. Parts also include: forecasting and order processing, production planning and control, material planning and purchasing control, inventory planning and forecasting itself, as well as strategies for the distribution and shipment of finished products and raw materials, and even customs management processes. Accompanying the entire process of demand and supply chain management is the management of information flow and capital flow. In other words, the inventory itself runs through all aspects of the entire demand and supply management process. If you want to achieve the fundamental purpose of inventory control, you must control the inventory in each link, rather than just managing the physical inventory that has been obtained.

Third, the organizational structure and assessment of inventory control. Since inventory control is the output of the entire demand and supply chain management process, to achieve the fundamental purpose of inventory control, there must be a reasonable organizational structure that is compatible with this process. Until now, we can find that many companies have only one purchasing department, which is responsible for the warehouse. This is far from meeting the requirements of inventory control. From the analysis of demand and supply chain management processes, we know that procurement and warehousing management are typical execution departments, and inventory control should focus on prevention. It is difficult for execution departments to "prevent inventory". The reason is simple. They The assessment indicators are to a large extent to ensure supply (production, customers). How to establish a reasonable demand and supply chain management process according to the actual situation of the enterprise, and then set up a corresponding reasonable organizational structure, is a question worthy of discussion by many of our enterprises

[Edit this paragraph] Inventory Classification of management models

The management work of determining the economically reasonable storage volume of materials in the production and circulation process based on the laws of supply and demand. Inventory management should play a buffering role to ensure balanced and smooth logistics, which not only ensures normal production and supply, but also reasonably compresses inventory funds to achieve better economic results.

In 1915, F.W. Harris of the United States published a model of economic order quantity, pioneering the study of modern inventory theory. Prior to this, V. Pareto of Italy had proposed Pareto's law when studying the problem of world wealth distribution, and the ABC classification method used in inventory management. With the scientificization of management work, the theory of inventory management has developed greatly, and many inventory models have been formed, which have achieved remarkable results when applied to enterprise management.

Classification of inventory management models: (1) Different production and supply situations use different inventory models. According to the ordering method, it can be divided into 5 ordering models.

① Periodic quantitative model: the quantity and time of the order are fixed.

② Periodic indefinite quantity model: The ordering time is fixed, and the order quantity depends on the difference between the actual inventory and the maximum inventory.

③Quantitative irregular model: When the inventory is lower than the order point, replenish the order and the order quantity is fixed.

④Indefinite quantity and irregular model: the order quantity and time are not fixed.

The above four models belong to the situation where the supply of goods is sufficient and orders can be replenished according to the demand at any time.

⑤Limited replenishment rate regular quantitative model: supply is limited and needs to be replenished one after another.

(2) Inventory management models can be divided into two types: deterministic and probabilistic based on supply and demand. The main parameters of the deterministic model are known exactly; some of the main parameters of the probabilistic model are random.

(3) According to the purpose of inventory management, it can be divided into two categories: economic type and safety type. The main purpose of the economic model is to save money and improve economic efficiency; the main purpose of the safety model is to ensure normal supply, and does not hesitate to increase the safety stock amount and safety reserve period to minimize the possibility of shortages. Although there are many models of inventory management, the unified principle of inventory management is to comprehensively consider various conflicting factors to obtain better economic results.

[Edit this paragraph] The 1.5 times principle of inventory management and inventory turnover

Sales staff must master the knowledge and skills of inventory management in the process of handling business. Inventory management has two aspects, one is the 1.5 times principle and the other is inventory turnover, which are explained separately below.

1. 1.5 times principle

The 1.5 times principle is one of the main contents of inventory management. It is a safety stock principle summarized through the sales practices of many companies. The specific data is based on The sales volume of customers in the previous period is based on the basis for suggested customer orders in this period. The 1.5 times principle of stocking is one of the job responsibilities that sales staff must master. It is a marketing strategy to actively strive for customer order quantities and keep track of customer sales. It is based on increasing customer sales and interests, so it can win customer trust and be easily adopted by customers.

The 1.5 times principle is also a scientific basis. However, just like many marketing rules, they must be mastered and applied flexibly to avoid applying them mechanically. For example, if you encounter special circumstances, you should make appropriate changes (such as weather, holidays, etc.), otherwise business will be affected.

After the 1.5 times principle is used well, it can ensure that customers have sufficient inventory, reduce the possibility of out-of-stock and out-of-stock products, ensure that customers can buy the products they need at any time, and help customers not miss out every time Opportunity to close a deal.

(1) The relationship between the 1.5 times inventory principle and order making

When the sales staff makes a sales call, they should recommend a reasonable order quantity to the customer. This is "making an order". It is one of the tasks that sales staff must do when visiting customers. The so-called order making is to recommend a reasonable order quantity to the customer based on the customer's sales volume in the previous stage, combined with new promotions or seasonal timing or weather and other factors, and mobilize him to order as recommended. When making an order, the information recorded on the customer card is used, so the prerequisite for placing an order is to fill in the customer card correctly. Only in this way can we effectively use the 1.5 times principle for inventory management, improve the efficiency and effectiveness of visits, and expand sales as much as possible. This is also one of the key responsibilities of sales personnel, which directly affects sales.

There are also sales staff who work with the idea of ??"taking orders". Taking orders is different from making orders. One is passive and the other is active. Taking an order means that the initiative is in the hands of the customer, while making an order is proactive. It is an order plan based on the results of the customer's sales and inventory research. Obviously, the two working methods have completely different effects. Making orders ensures an accurate grasp of the customer's sales situation, and also ensures that the customer's funds, space, energy and time are used most effectively to create maximum profits.

(2) Steps for making an order

"Making an order" should be carried out according to the following steps:

Step 1: Check the data on the customer record card;

Step 2: Calculate the actual sales since the last visit;

For example: the inventory quantity at the last visit; the order quantity at the last visit; The customer's on-hand inventory count. The sales representative fills in the above data on the customer card when visiting the customer. The sales representative will use them when calculating the sales volume since the last visit, so the data on the customer card should be correct.

Step 3: Suggest new order quantity.

When recommending a new order quantity, the safety stock principle of 1.5 times should be emphasized. The specific calculation method is as follows:

Safety stock = actual sales volume after the last visit × 1.5

Recommended order quantity = safety stock quantity - existing inventory

(3) How to get customers to accept the order plan based on the 1.5 times principle

In actual work, Many sales staff are also very clear about the above steps and can accurately calculate the number of orders based on the 1.5 times principle, but they cannot get orders that comply with this principle. How can this situation be avoided?

The key is to pay attention to the skills of getting customers to accept suggestions when making orders. Some customers do not understand the benefits of placing orders according to the 1.5 times principle. Sales staff must be able to make customers understand:

The order quantity recommended according to this principle is more reasonable to ensure that customers maintain appropriate inventory quantities and avoid Out of stock, shelf space can be used efficiently;

With a certain amount of inventory, consumers' purchasing needs can be met without missing any transaction opportunities;

1.5 times The inventory principle can help customers make effective use of space and funds, without causing losses such as backlog of goods, funds, and invalid space occupation;

The 1.5 times inventory principle plus inventory turnover can ensure that customers provide consumers with The products are always fresh, which can well improve the image of the point of sale and drive the sales of other products;

Let customers understand that the job of sales staff is to help customers better meet consumer needs , to increase customers' sales and profits;

Sales staff must use their knowledge and skills to gain the trust of customers. Once this trust is established, customers will accept the 1.5 times principle for placing orders.

If the sales staff strictly follows the visit route and frequency, each customer visit has a certain cycle, and the customer can also be informed that 1.5 times the safety stock can effectively ensure that the customer visits during this visit cycle. There is neither a shortage of goods nor a shortage of goods.

2. Inventory turnover

Inventory turnover is an important part of inventory management for customers, and it is also one of the important job responsibilities of the company's sales staff. The goods sold to customers cannot be sold out at once, but will last for a period of time, and inventory always exists. For food, what is more complicated is that it has a shelf life problem. It can be seen that inventory must be managed scientifically and effectively.

(1) What is inventory turnover?

The main content of inventory management is inventory turnover. What is inventory turnover? It includes two types: front-line inventory and back-up inventory turnover. Front-line inventory refers to bulk goods displayed on shelves or in a retailer's shopping environment; back-up inventory refers to goods stored in warehouses for replenishment. Inventory turnover includes the turnover of front-line inventory and back-up inventory. It requires sales staff to replenish goods on customers' shelves in a timely manner to ensure that the product display on the shelves meets vivid standards; on the other hand, they should follow the first-in-first-out principle for inventory turnover, with the purpose of ensuring that customers provide consumers with the goods they need. The products are always fresh. In fact, the so-called inventory turnover is to circulate the products on the shelves that are not sold temporarily according to the first-in, first-out principle.

Inventory turnover is a daily task that sales staff must do during sales visits to ensure that customers always provide consumers with products with the latest production date. Inventory turnover is not only one of the important responsibilities of sales staff, but also to guide and influence customers in their daily inventory turnover. Salespeople must make customers understand that:

Inventory rotation can be effective and directly stimulate sales. Obviously, if the goods displayed on the shelves are sold out and not replenished in time, many sales opportunities will be lost. Moreover, the products stored in the warehouse cannot be sold, and the lost sales opportunities will never come back.

Without inventory, there is no profit. Products that are not on the shelves cannot be sold. Reasonable product inventory is the simplest way to ensure that they are available for sale.

Facilitate restocking and help customers prepare merchandise inventory correctly. Most customers decide on the variety and quantity of their orders based on their inventory. If there are almost no products in the warehouse or are no longer available, store owners will order them, so if salespeople help customers put their stocked products on the shelves to free up their warehouses, they will naturally place orders.

Sales staff help customers restock shelves during daily visits, which not only stimulates sales, but also saves customers' time and their own time. This job is not only the job responsibility of sales representatives, high-level sales supervisors and managers also have to help customers with inventory turnover when visiting retailers, and they also have to influence customers to help with timely replenishment. Good companies and salespeople understand that sales doesn’t end with the product being sold to the customer. It doesn’t end until the customer buys and starts actually consuming the fresh product. In order to ensure that consumers buy fresh products, follow the first-in-first-out principle, so as to avoid product expiration and customer returns, better meet the needs of consumers, and ultimately win for customers. sales and profits.

(2) How to carry out inventory turnover?

How to carry out inventory turnover? Sales staff promptly replace defective products in accordance with the company's regulations and standards, manage customers' inventory, strive to be customers' professional consultants, and proactively provide customers with comprehensive inventory management services, not just "taking orders." To achieve this, sales staff must:

Have a comprehensive knowledge of the company's products, such as shelf life, meaning of codes, product storage conditions, etc. For another example, if the product is placed in a place exposed to direct sunlight, it will fade, which will affect the quality and make it difficult to sell.

Secondly, sales staff must understand the applicable scope and inventory quantity of various packaging. That is to say, by understanding the needs of consumers and customers, understanding various brands and packaging knowledge, and recommending the correct packaging and brand product combinations to customers, this is the prerequisite for customer management to ensure that customers are selling products that meet consumer needs. condition.

Thirdly, we must have a deep understanding of the principles of inventory turnover. There are three principles that must be followed: manually rotate the products displayed on the shelves; implement the first-in, first-out principle; and record the inventory number on the customer card.

In addition, inventory turnover also requires methods and techniques. Comprehensive product knowledge can help to grasp the shelf life, storage conditions, and the best time for consumers to purchase; familiarity with the applicable scope of various packaging and inventory levels can help sales staff judge the distribution standards implemented by different retailers and determine the distribution standards according to the retailer. Set the appropriate inventory quantity according to the shipment situation; forecasting opportunities can help sales staff think more rationally and take into account some factors that affect business in advance, such as the impact of seasons; understand the operating and space constraints to help you according to the These situations provide opportunities to develop different business propositions and successfully sell to retailers to gain cooperation and promote performance improvement; merchandising activities can obviously increase sales through on-site sales stimulation.

As another example, inventory rotation has many tangible benefits for customers. Mainly, helping customers manage inventory on shelves and back-up warehouses can save customers' time; it can save manufacturers' time; accurate inventory turnover can also understand inventory levels at any time, judge sales status, and do replenishment work; etc.