The Standard Operating Procedure for Inventory Control

Establishing standard operating procedures - or SOPs - for inventory control is essential, if you want to run a profitable business. Inventory shrinkage - the amount of inventory loss due to theft or loss - can hit you hard if you aren't careful. By coming up with procedures sooner rather than later, you can ensure that your employees know what to do at every step of the inventory management process. To that end, let's look at the various links in that chain.

Inventory control begins the moment product arrives at your facility. Your receiving department starts a paper trail that will let you track every item that comes into your possession. To that end, your receiving team must visually inspect every item as it enters your facility. Team members should reject any item that is damaged, and they should document these items for your records. Additionally, the shipment should exactly match your order. Reject any unexpected items as you'll likely be billed if you accept them.

Arguably, this is the most important aspect of inventory control, so you may want to spend extra time on this step when drafting your standard operating procedure for inventory control. Remember that documentation is absolutely essential here. If you don't document any damaged or missing items, you won't be able to hold suppliers accountable.

An inefficient or deficient storage system can lead to waste. For instance, in an inefficient system, items can expire or become lost. You should organize your storage in a logical manner that allows workers to get at items as quickly as possible. For instance, if you owned a daycare, you might organize your supplies like this:

• Supplies. These are expendable materials that are used every day, such as paper, chalk, art supplies, and writing implements.
  
  
• Equipment. These are reusable items that help teachers or caretakers do their work. This includes computers, tablets, video cameras, TVs, tape recorders, and musical instruments.
  
  
• Textbooks and other books. These items should be kept in good condition so they don't have to be replaced often. Therefore, it makes sense to store them separately.
  
  
• Software. Licensed software use for education should be inventoried in a separate ledger. The ledger would list which computer the software runs on since some vendors only allow activation of software on one machine.

Keep in mind that every item in your facility has its own storage requirements. Even items that don't have use by dates may have to be stored in a particular way. For instance, some items may need to be kept at or below a certain temperature. Other items may need to be rotated - known as FIFO - or, 'first in, first out' - to ensure that older items are used first. Finally, some items, like certain chemicals, cannot be stored with other items.

Your inventory tracking system should be able to keep up with these requirements. As part of your final SOP for inventory control, you may want to require that staff regularly checks the inventory system to make sure it's up to date.

If you store inventory in a warehouse, it's important to take some extra time to think about security. Your warehouse SOP should specify both storage procedures and security procedures. On the security side of things, you would want to specify security personnel protocols for security camera monitoring. You should create a schedule for security equipment maintenance and testing, as well.

You will also want to establish a procedure for transferring items from the warehouse to the sales floor. Like inventory receiving, this process should be documented so that you have a record of where each item is at all times. Keep in mind that one of the major reasons for inventory shrinkage is employee theft.

When an item sells, it moves from your sales floor or warehouse to the consumer. Naturally, you will want to document this process with your inventory control system. The key here is to remove a sold item from inventory at the time of sale. If your procedures here are weak, you could run into trouble. Modern inventory control systems will take care of this for you, but it's still wise to have a procedure in place that spells out how often staff should audit the software to make sure it's working properly.

As you can see, inventory control is all about documentation. By working on your standard operating procedures for inventory control ahead of time, you're well on your way to ensuring that inventory moves smoothly from your loading dock to your warehouse, and finally, to the end consumer.