What is Inventory Control? Challenges, Methods, Best Practices

Struggling to maintain a balance called stock control, in your stockroom? Overstocking or running out of products to meet customer demands? It might be time to refine your inventory control system.

What Is Inventory Control?

Inventory control systems focus on overseeing and managing a company’s stock to maintain the right amount of goods. The primary objective is to reduce costs while ensuring there’s enough inventory to satisfy customer needs. This involves monitoring inventory levels, predicting demand, and making decisions about ordering, stocking, and shipping products

Why Is Inventory Control Important?

Accounting Accuracy

Inventory control guarantees accounting precision by offering insights into a company’s inventory levels and cash flow. Accurate data allows businesses to make informed decisions about purchasing, stocking, and shipping. With precise records, businesses can determine the number of goods sold, gross profit, and net income.

Organizational Control

Techniques like cycle counting and ABC analysis offer organizational inventory control techniques, helping businesses manage their stock levels efficiently. Proper practices, including safety stock and reorder points, ensure businesses have the right amount of products to meet customer demands without overstocking.

Quality Control

By diligently tracking inventory levels, businesses can spot discrepancies or quality issues. This ensures the quality reputation of a business and boosts customer satisfaction. Using Point-Of-Sale (POS) and Just-In-Time (JIT) inventory tracking systems ensures smooth inventory movement throughout the supply chain. Investing in such technologies provides insights into stock control and timely replenishment.

Challenges of Inventory Control

Human Error

Manual data entry can lead to mistakes. These errors can result in incorrect stock levels, increased costs, poor inventory management and missed sales opportunities. An effective inventory control system, using barcode or RFID technology, can minimize these errors.

Finding the Time and Resources

Setting up proper inventory control, can be resource-intensive. Regular stock counts, demand forecasting, and data analysis can be challenging for resource-limited businesses. However, investing in inventory management software can streamline the process, saving time and resources.


For businesses with intricate supply chains or multiple locations, maintaining visibility into raw materials and stock levels can be challenging. Collaborating with suppliers and implementing effective purchasing practices can help maintain visibility and ensure a smooth supply chain.

Inventory Control vs. Inventory Management

While inventory management oversees the entire inventory system, perpetual inventory control system focuses on ensuring accuracy and minimizing costs. It emphasizes optimizing stock levels for profitability.

Examples of Inventory Control in Practice

Periodic Inventory System

This manual inventory account system involves regular physical stock counts. It’s suitable for small businesses with limited products.

Retail Operating System

Designed for retail businesses, this system tracks real-time inventory levels, monitors sales, and reorders products automatically to meet customer demand.

Perpetual Inventory System

This real-time system uses barcodes or RFID technology for tracking. It ensures accurate records and optimal stock levels.

Spreadsheet to Control Inventory

A basic tool for small businesses, spreadsheets can also track inventory, stock levels and sales trends. However, they can be error-prone and lack real-time tracking.

Effective Inventory Control Process Tips

  1. Consistency in Labeling: Use barcodes or QR codes for easy identification and reduced errors.
  2. Real-Time Tracking: Use inventory control software like ShipHero for real-time monitoring.
  3. Set Reorder Points: Based on sales history, set reorder points to avoid stockouts.
  4. Back-up Data: Regularly back up your inventory data to prevent data loss in case of a system failure. Consider using cloud-based inventory management software to store your data securely and enable remote access to your inventory records. This can also help businesses optimize their supply chain management by providing access to inventory data for multiple vendors and destination points.
  5. Regular Audits: Conduct regular physical inventory counts to identify any discrepancies between the actual physical inventory levels and the recorded levels. This can help you identify any issues with your inventory control process and take corrective action to improve accuracy and efficiency.

Inventory Control Systems to Consider

Inventory control and inventory management systems are vital for product-based businesses. ShipHero’s Warehouse Management Software offers a comprehensive solution, providing real-time tracking, automated replenishment, and detailed analytics.

Lead Time in Inventory Control

Definition and Importance

Lead time in inventory control refers to the duration between placing an order for goods and their actual arrival. It is a crucial metric as it influences various aspects of an inventory management system, including stock levels, order quantities, and safety stock calculations.

Factors Affecting Lead Time

Several elements can impact lead time:

  • Supplier Factors: Delays can occur if a supplier doesn’t have sufficient stock or if they have inefficient processing and dispatch systems.
  • Logistical Factors: Transit issues, such as transportation delays, customs processes, and shipping method, can extend lead times.
  • Demand Variability: If an item experiences sporadic or unexpected demand, it might affect how quickly replenishment orders can be processed and received.

Managing and Reducing Lead Time

Businesses aim to reduce lead times to optimize inventory levels and reduce holding costs. Some strategies include:

  • Establishing Strong Supplier Relationships: This can lead to priority treatment and faster processing times.
  • Opt for Local Suppliers: Choosing suppliers closer to the business location can drastically reduce transportation time.
  • Efficient Order Processing: Streamlining the order process within the business can reduce internal delays.

Dead Stock

Definition and Implications

Dead stock refers to various types of inventory items that have remained unsold for a lengthy period and are unlikely to be sold in the future. These items can tie up capital and occupy valuable warehouse space, preventing the storage of more profitable items. Moreover, the longer items remain in storage, the higher the likelihood they will become obsolete or spoil (in case of perishable items).

Causes of Dead Stock

Several reasons can lead to the accumulation of dead stock:

  • Overordering: Purchasing more stock than demand requires.
  • Changing Market Trends: Products may no longer be in vogue or may become obsolete.
  • Inadequate Marketing: Failing to adequately promote or market a product can lead to decreased sales.

Managing and Reducing Dead Stock

To manage dead stock:

  • Inventory Analysis: Regularly review inventory to identify slow-moving items.
  • Discounting: Offer promotions or discounts to encourage sales of stagnant items.
  • Bundle Sales: Package dead stock items with popular items to increase their sales appeal.
  • Return to Supplier: If possible, return unsold items to suppliers.

Understanding both lead time and dead stock is essential for effective inventory management. By managing these aspects, businesses can optimize their most efficient inventory control processes and ensure profitability.

Inventory Control FAQs

What Is Basic Inventory Control?

It’s the process of using inventory control procedures overseeing product quantity and location within a business, ensuring optimal stock levels while minimizing costs.

What Is FIFO and LIFO in Inventory?

FIFO (first in, first out) are inventory control methods and LIFO (last in, first out) are inventory costing methods. FIFO sells the oldest items first, while LIFO sells the newest items first.

What Is Good Inventory Control?

It involves managing stock levels effectively, tracking inventory accurately, forecasting demand, using efficient replenishment processes, and employing inventory control tools. Regular audits and data analysis are also essential.

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