FACULTY OF BUSINESS

ACCOUNTING SCHOOL

Inventory Control

COURSE:
BUSINESS LAB

AUTHOR:

Melissa Vanessa, Minaya Moreno

TEACHER:

Llauce Lezama Karen Aurora

Chimbote - Perú

(2024)
 I. Introduction

Inventory control has established itself as one of the fundamental pillars in

modern business management, playing a crucial role in optimizing the
operational efficiency and responsiveness of organizations to market demands.
In a highly competitive environment, where margins of error are increasingly
reduced, proper inventory management not only ensures that companies can
meet their customers' expectations in a timely and effective manner, but also
has a direct impact on the optimization of resources, the reduction of operating
costs and the improvement of the supply chain as a whole. Thus, the ability to
efficiently manage inventory has become a key differentiating factor that can
determine the sustained growth of an organization or, on the contrary, its loss of
competitiveness in the market.

The impact of poor inventory control can be devastating. The consequences

can range from the inability to meet delivery deadlines, which deteriorates
customer trust and loyalty, to excess stock, which increases storage costs,
reduces liquidity and increases the risk of obsolescence. These issues not only
affect profitability, but also disrupt internal operation, leading to inefficient use of
space and resources. Faced with this reality, companies are constantly seeking
to innovate and improve their processes by implementing advanced
technologies and modern methodologies that optimize accuracy and efficiency
in stock management.

While traditional strategies, such as the ABC (Inventory Ranking by Importance)

method, the cyclical inventory system, and reorder points, continue to be of
great relevance, technological advancement has transformed inventory
management. Today, technology solutions such as enterprise resource
planning (ERP) systems and real-time data analytics platforms offer powerful
tools to optimize the supply chain and manage inventories with unprecedented
accuracy. Not only do these technologies allow for more detailed monitoring of
stock, but they also provide valuable data that can be used to make informed
decisions and improve efficiency across the operation.
This report dives into a detailed analysis of the importance of inventory control,
considering both traditional practices and recent innovations that have
transformed the inventory management landscape. From the perspective of
operational efficiency, an effective inventory system must not only be able to
balance supply and demand, but also adapt quickly to market changes,
reducing unnecessary costs and avoiding losses arising from improper resource
management. In this sense, the best practices for inventory management will be
reviewed, such as the Just-in-Time (JIT) model, which seeks to minimize
inventories and reduce waiting times, as well as the use of safety inventories,
which allow unforeseen events to be faced without affecting production or
deliveries to customers. In addition, it will explore how process automation,
through the use of advanced technologies, contributes to reducing management
times, improve the accuracy of records and speed up replacement procedures.

Inventory management also faces a number of current challenges, such as

disruptions in the global supply chain, fluctuations in consumption patterns, and
the growing need for more sustainable management that minimizes the
environmental impact associated with excess inventory. The integration of
emerging technologies such as the Internet of Things (IoT), artificial intelligence
(AI), and robotic automation has opened up new possibilities for monitoring and
optimizing inventory in real-time. These tools allow companies to have clearer
visibility of their supply chain, reacting in an agile way to variations in demand
and improving the traceability of products throughout their life cycle.

Through the review of case studies and practical examples, this report seeks to
provide clear and actionable recommendations that enable companies to
improve their inventory management and adapt to dynamic market challenges.
It is therefore intended to offer a comprehensive guide that not only underlines
the relevance of inventory control, but also encourages companies to
incorporate innovative strategies and disruptive technologies that maximize
their operational efficiency and, in turn, strengthen their competitiveness in the
long term.

The main objective of this report is to analyze the importance of inventory

control in business management, identify the best practices and strategies, both
traditional and technological, to optimize stock management, and offer concrete
recommendations to improve operational efficiency, reduce costs, and increase
the competitiveness of organizations in a dynamic and globalized market
environment.

II. Development

Inventory control is a critical function in the management of any business that

handles physical goods, whether in the form of raw materials, products in
process, or finished items. It takes place at various points in the supply chain,
including the receipt of goods, storage, production, and final distribution of
products. This process is implemented by a variety of sectors, from
manufacturing and retail to logistics and pharmaceutical distribution. Key
departments that use and oversee inventory control include logistics,
purchasing, warehousing, and production, as well as sales and customer
service, which rely on well-managed inventory to meet delivery deadlines and
meet market demand.

Effective inventory control allows companies to keep accurate records of

available quantities, product inflows and outflows, and item expiration dates or
lifecycles. This makes it easier to plan and make strategic decisions, such as
replenishing stock at the right time and forecasting peak demand. Technologies
such as barcode-based inventory management systems and radio frequency
identification (RFID) help automate and streamline these processes, providing
real-time information and reducing the likelihood of human error.

Inventory control is also used at critical times, such as preparing orders for
customers, conducting periodic physical inventories to verify the accuracy of
records, and managing returns and stock adjustments. During these activities, it
is essential to have an orderly system that allows you to quickly identify the
location of the products, their available quantity and their condition.

When a company does not keep proper inventory control, the consequences
can be significant and multifaceted. First, a lack of visibility into stock can lead
to stockouts, resulting in lost sales and dissatisfied customers looking for
alternatives from competitors. On the other hand, excess inventory results in
high storage costs, capital tie up, and an increased risk of obsolescence,
especially in sectors where products have a limited shelf life, such as fashion,
technology, and food.

The absence of effective inventory control can also trigger internal operational
issues, such as production delays due to a lack of supplies, or inefficient
warehouse space management that hinders staff mobility and productivity. In
addition, a lack of accuracy in records can lead to accounting discrepancies,
making it difficult to analyze financially and make informed decisions.

In addition, inventory control has become even more relevant in the current
context, where companies operate in an increasingly complex and volatile
environment. Globalization and the interconnectedness of markets have
brought with them significant opportunities, but also unprecedented challenges,
such as supply chain disruptions and sudden fluctuations in demand. The
COVID-19 pandemic, for example, highlighted vulnerabilities in inventory
management globally. Companies that relied on traditional inventory models
struggled to respond to disruptions, while those that had implemented advanced
technologies and flexible inventory strategies were able to adapt more quickly to
changes.

The importance of efficient inventory management is reflected not only in the

traditional manufacturing and retail sectors, but also in critical industries such as
pharmaceuticals and food. During the pandemic, shortages of essential
products, such as medical equipment and food, highlighted the need for more
robust and diversified inventory planning. Companies that incorporated
enterprise resource planning (ERP) systems and predictive analytics tools were
able to anticipate problems and adjust their replenishment processes more
accurately.

In addition, sustainability and a focus on responsible practices have become

priorities for businesses and consumers. Inventory management is not only a
matter of financial efficiency, but also of environmental sustainability. Excess
inventory can result in significant waste, contributing to increased waste and
inefficient use of natural resources. Therefore, companies must adopt strategies
that not only optimize the flow of products, but also reduce their environmental
impact. The implementation of technologies such as the Internet of Things (IoT)
allows companies to monitor the status of their inventories more accurately and
manage product turnover efficiently, minimizing both waste and obsolescence.

Another factor influencing inventory management in today's reality is

accelerated digitization. E-commerce has grown exponentially, driven by
changes in consumer shopping habits that prioritize convenience and
immediate availability of products. Companies that manage their inventories
ineffectively face challenges such as delivery delays, stockouts, and customer
churn. To compete in this environment, it is essential for companies to use
inventory management tools that integrate automation and real-time data
analytics. The ability to predict demand, analyze purchasing patterns, and
adjust inventory accordingly allows businesses to stay competitive and meet
customer expectations

Recommendations

To maintain and improve positive results in inventory management, it is critical

to move towards process automation through the implementation of specialized
software. These tools allow for more precise and real-time control of inventory,
reducing the likelihood of human error and facilitating quick and informed
decision-making. Automation helps to optimize internal logistics, improve stock
visibility, and streamline processes such as product receipt and dispatch.

It is also important to establish replenishment policies based on a detailed

analysis of historical sales data and demand patterns. This helps to predict
more accurately when and how much to replenish, which avoids both
unnecessary stock accumulation and the risks of stock-outs. Having a data-
driven approach allows companies to be more proactive and adapt to market
fluctuations more effectively.

Another key recommendation is to carry out periodic training for personnel in

charge of inventory management. Ongoing training ensures that the team is
familiar with best practices and can make the most of the technology tools
available. In addition, trained personnel are able to respond efficiently to
unforeseen events, identify areas for improvement in processes and ensure
accuracy in stock handling.

Finally, it is advised to conduct regular audits and reviews of inventory policies

and procedures to identify potential failures or areas for optimization. This
comprehensive approach ensures that the company maintains solid control of
its inventories, improving operational efficiency and contributing to long-term
sustainability and profitability.

Conclusions

Inventory control is an essential factor to ensure the profitability and

competitiveness of any company. Efficient stock management not only reduces
operating costs, but also improves responsiveness to market demand, resulting
in increased customer satisfaction. Maintaining optimal inventory, balancing
product availability with minimizing surpluses and obsolescence, is crucial to
optimizing resource utilization and maximizing profit margins.

In addition, proper inventory control facilitates more informed and strategic

decision-making, from purchase planning to product distribution, which
contributes to the stability and growth of the company. In this sense, it is
essential that companies continue to implement and update good practices in
inventory management, adapting to new technologies and methodologies that
allow greater efficiency. This not only ensures short-term operability, but also
ensures long-term success and sustainability in an increasingly dynamic and
competitive business environment.

On the other hand, automating replenishment is a key strategy to ensure that

inventory levels are always adequate without relying exclusively on manual
calculations. Automated systems generate replenishment orders based on
current stock levels and demand projections, ensuring that there are no
stockouts or excess inventory. This also improves supply chain efficiency and
reduces the risk of human error.

The ABC classification of products is another effective practice for managing

inventories, as it allows you to identify which are the most important or fastest-
moving products (A), the slowest-moving products (B), and those with low
demand (C). This helps allocate resources more efficiently, prioritizing key
products that require more frequent and targeted attention, while slow-moving
products can be handled less frequently.

Maintaining safety inventories is essential to mitigate risks arising from

unexpected fluctuations in demand or supply chain disruptions. These
inventories act as a reserve, ensuring that businesses can continue to operate
smoothly, even in the face of unforeseen events. However, it is crucial not to
maintain excessive levels of security, as this can lead to an unnecessary
increase in costs.

Finally, predictive demand analytics, supported by the use of data analytics

technologies, makes it possible to anticipate changes in consumption patterns,
proactively adjusting inventory levels. This type of analysis helps companies
avoid both stockouts and overstocks, ensuring that resources are aligned with
market trends.

The adoption of sustainable practices is also becoming increasingly relevant in

inventory management. The efficient use of resources, the reduction of waste
and the optimization of packaging not only contributes to operational efficiency,
but also improves the company's image in the eyes of environmentally
conscious consumers. Implementing these practices can result in significant
long-term savings, as well as complying with increasingly stringent
environmental regulations.
III. REFERENCIAS BIBLIOGRÁFICAS

1) Economipedia. (2020). Control de inventario. Recuperado de

https://economipedia.com/definiciones/control-de-inventario.html
2) 2) Jasmin Software. (2023). Control de inventario: cómo mejorar
la gestión de tu almacén. Recuperado de
https://www.jasminsoftware.es/blog/control-de-inventario/
3) Odoo. (2021). Inventory. Recuperado de
https://www.odoo.com/es_ES/app/inventory
4) Tiendanube. (2019). Control de inventarios: qué es, para qué
sirve y cómo hacerlo en tu negocio. Recuperado de
https://www.tiendanube.com/blog/control-de-inventarios/
5) InfoInventario. (2019). ¿Qué es el control de inventario y cómo
funciona?. Recuperado de https://infoinventario.com/que-es-el-
control-de-inventario-y-como-funciona/