Controlling Inventory

Point of Sale (POS) software is by far the greatest innovation for controlling inventory because in the past all inventory had to be monitored manually and all appropriate calculations that would measure profits had to be done with a calculator and a pen. Today a good POS system will record every sale from every cash register into a relational database, and the system if advanced enough will show reports of daily sales figures each day, weekly sales figures each week, monthly sales figures each month, and yearly sales figures each year. Some POS systems are even advanced to the extent that they will not only contain sales data but will also keep record of all inventory in the store, keep record of location of store inventory, and manage the statues of orders, but in general I will consider the more advanced functions of a good POS system to be the basic functions of a Inventory Control system.

A good POS system will thus also be part of a good Demand Chain Management (DCM) system. Ideally thus a Inventory Control System will combine both the sales software of the POS system and the ordering software of a DCM system into one software package that keeps track of all inventory from a in store prospective (Inventory Control), sales prospective (Point of Sales), and ordering prospective (Demand Chain Management). Ideally when the inventory levels get low enough to make another order of products the DCM system will automatically send in a new order for the inventory in order that the shelves do not run the increasing risk of going empty. The DCM system thus must be able to order the most cost effective order size by the most cost effective date in order that costs are minimized both in ordering the product and in storing the product on the shelf (shelf cost per product is equal to all operating costs for a time period divided by all available shelf space in a store and then multiplied by the amount of space the product takes on the shelf).

The POS system thus must produce reports for products that do not sell very often, and the POS system must also be specific enough to produce tables and charts of sales activity for the history of every product that is being sold. The DCM system on the other hand must be able to produce charts of order activity over time showing price levels paid and such. A good application of a what I will call a Expert System would be a software package that is designed to be part of the Inventory Control System that adds product cost, shelf space cost, and all other costs together associated with selling the product and then subtract all of those costs from the price paid by the customer in order to arrive at the profit margin for the product, and then the Expert System would compare profit margins to minimum profit margin levels for each type of product and then report the products that fall bellow ideal profit margins. Overall, the Expert System would thus have all different minimum profit margins for products that are marked as seasonal, discontinued, basic commodity, accessory, and so on.

The Expert System may even consider sales patterns for the type of product sold and then change price levels and then either print new price tags or make a report of price changes that store management or corporate workers could either approve or deny. Most businesses may not develop a Expert System that is reactionary to sales, profit margins, and costs, but if a business does not produce such a system, then someone has to manually do economic analysis for products in order to know if products are worth keeping on the shelf or not. Overall, the most essential commodity based products that any store will have will have the lowest profit margin because people will for example go to one flower shop over another based upon the price of roses but the price of vases or rose accessories will never enter the decision making process of a person choosing one flower shop over another, and a flower shop will benefit by selling roses for little to no profit in order to get people in the door while vases on the other hand are sold at a high profit margin.

The best Inventory Control system in the world is worthless if the inventory counts are wrong as a result of product shrinkage not recorded into the system as a result of theft and other such losses. Not only that but if the DCM orders the products and then if they are scanned as received when they arrive and then added into the inventory control system automatically, then if a vender shipped a order of fifty for example but only put forty-eight into the box, then the Inventory Control system will have a store count that is off by two units. As a result of all the bad things that can happen with computer inventory being inaccurate, store workers need to constantly be aware of situations that occur when the shelves are empty and when the shelves are way to full. If shelves are empty or way to full, then store inventory counts may need to be corrected.

Inventory Control can thus be a very complicated issue with lots of ways to formulate the needed software in order to get the job of maximizing store profits through inventory control done correctly. Lots of advanced mathematics can be implemented in a reactionary Expert System such as linear programming, calculus based statistics, and general probability calculations. Overall, a Expert System could even have a Neural Network or a Genetic Algorithm incorporated into it in order to arrive at very unique solutions for ordering new products that could optimize profitability through ordering a theme of products through taking into account the history of millions of sales and ordering records.