What is Inventory Control? Why is It Important?

Posted by Mike Woods

Fixed Asset Market Manager

in Inventory Management

Updated July 24th, 2024

Table of Contents

• What is Inventory Control?
• 5 Advantages of Inventory Control
• Pros of Computerized Inventory Control
• Inventory Control Best Practices
• Final Thoughts

In today’s fast-paced business world, effective inventory management is more crucial than ever. Inventory control is an essential aspect of business operations and done properly can significantly impact a company’s efficiency and profitability.

From defining inventory control to discussing its various methods and benefits, this comprehensive guide provides valuable insights for businesses of all sizes looking to optimize their inventory processes.

Whether you’re a small startup or a large corporation, understanding and implementing strong inventory control practices can be the key to streamlining operations, reducing costs, and ultimately boosting your bottom line.

What is Inventory Control?

Inventory control, also referred to as stock control, is so broad and incorporates so many functions that it is difficult to describe in a limited definition, but we like how this Inc.com entry puts it: Inventory control refers to “all aspects of managing a company’s inventories: purchasing, shipping, receiving, tracking, warehousing and storage, turnover, and reordering.” 

Inventory control is such a critical piece of an organization’s operations and bottom line that it is too important to leave to human error or antiquated systems. That’s why so many companies opt to invest in inventory control systems, so that all of the components of inventory control are managed by one integrated system.

5 Advantages of Inventory Control

The ultimate goal of your inventory control should be to maximize your organization’s use of inventory. When you maintain proper inventory levels, you can rest easily knowing that your capital is not unnecessarily tied up in your inventory.

If you are in manufacturing, inventory control also protects production if there are problems with bottlenecking or the supply chain.

Typical benefits of a computerized inventory system include…

• Increased profitability
• Having enough stock on hand so that you don’t run out
• Barcodes and inventory labels to track inventory efficiently
• Reduction or elimination of inventory write-offs
• The ability to conduct audits more quickly and efficiently

Pros of Computerized Inventory Control

If you handle several warehouse locations or need to access your inventory levels on the go, a computerized inventory control system may be right for your organization’s needs. Inventory control software solutions are more efficient than manual ones, allowing for more flexibility and an easier time retrieving information.

Computerized inventory systems allow you to quickly get a real-time glimpse into your inventory value. Other beneficial features of computerized inventory control include:

• Inventory data integrated with accounting and invoicing systems, along with sales order processing and purchase order processing so that inventory levels and data update automatically
• Automatic inventory monitoring, so that orders are placed as soon as the re-order level is reached
• Automatic batch control
• Ability to identify the least expensive and fastest suppliers
• Barcoding systems enhance the processing and ordering process and speed up the inventory management process

Inventory Control Best Practices

There are some best practices for inventory control that are worth considering so that you can achieve the ideal inventory levels in your organization. Modern Materials Handling gathered a panel of experts with more than 80 years of combined inventory experience to share their tips and advice.

1. Consider inventory optimization tools – “These optimization tools take into account demand variability, supply variability, and replenishment parameters to determine how much inventory to hold in order to guard against that variability.” ~ Dave Wheeler, principal of supply chain services for St. Onge
2. Employ business solutions that use real-time analytics under one platform – “You have one picture of inventory, one picture of costs, and one platform to plan against. This allows you to have real-time inventory within that one model and even track who owns that inventory – even if I’ve got a product that has been consigned to me from my supplier, it’s still in the same inventory model.” ~ Jennifer Sherman, senior director for fulfillment applications strategy for Oracle
3. Don’t treat all SKUs the same – “Each and every product does not have the same supply and demand variability pattern. Focus on those 20% that statistically make up 80% of the volume and manage that inventory really well, so you maximize sales and profits.” ~ Aman Sapra, senior project manager of inventory and supply chain strategy at St. Onge
4. Keep an eye on your suppliers – “All of that data is typically available in a WMS, but has anybody really looked at it to determine unreliable suppliers?” ~ Aman Sapra
5. Track essential attributes – “It’s not enough to just track your lot number. If you used subcomponents and subassemblies that you mix into your product, you also need to know those lot numbers in case your product has a recall.” ~ Curt Sardeson, managing principal of the Open Sky Group
6. Leverage mobile devices – “It’s time for even businesses that don’t see themselves as complex to demand mobility solutions for accuracy.” ~ Jennifer Sherman
7. Be smart about your slow-moving and obsolete items – “The more DCs that you store an item in, the more inventory you’re going to have. If you pull that inventory back into a single DC, you’re able to aggregate your demand variability, which allows you to reduce your required safety stock.” ~ Dave Wheeler
8. Don’t neglect slotting – “As a daily activity, you can stay on top of [slotting] because it’s only a little bit of work and completely manageable. If you slot annually it becomes a major undertaking.” ~ Curt Sardeson

Final Thoughts

In conclusion, inventory control is a critical component of successful business management. By implementing effective inventory control strategies, companies can optimize their stock levels, reduce carrying costs, minimize waste, and improve customer satisfaction.

As we’ve explored throughout this article, the benefits of proper inventory control extend far beyond the warehouse, impacting everything from cash flow to customer relations.

In an increasingly competitive marketplace, businesses that master the art of inventory control position themselves for greater efficiency, profitability, and long-term success. Whether through advanced software solutions or tried-and-true manual methods, investing time and resources into refining your inventory control processes is a decision that will undoubtedly pay dividends in the future.