What is Inventory Control?

Monitoring and managing inventory is essential for many organizations, and knowing how to control inventory in warehouse settings is vital for proper management. Inventory control is crucial in managing inventory, from optimizing stock levels to minimizing costs and boosting efficiency.

But what is inventory control, what does inventory control do, and what are the types of inventory control? This article will cover everything about inventory control so you can navigate your inventory like a pro!

What is Inventory Control?

Understanding inventory control is crucial to determine how to control inventory levels. Inventory control, also referred to as stock control, involves handling a company’s inventory levels and ensuring the right number of supplies are accessible in the organization. This process begins when you initially stock items and continues until their final destination, monitoring the movement and storage of goods.

But what is inventory control in operations management, and what is inventory control in logistics? Inventory control guarantees that businesses can meet customer demand and remain financially stable. This journey requires accurate data from customer purchases, reorders, storing, warehousing, shipping, and more, and might include the following processes:

• Inventory counts
• Tracking sales and purchase orders
• Barcode scanner integration
• Inventory reports
• Supply chain management
• Product details and history

Why is Inventory Control Important?

Knowing how to control inventory in manufacturing, retail, warehouses, and other environments is crucial for several reasons. Inventory control helps businesses avoid costs associated with overstocking while reducing the risk of understocking. Inventory control systems provide a comprehensive way to manage inventory levels and help identify areas where inventory needs to increase or decrease, revealing cost-saving opportunities.

Inventory control is also essential for quality and organizational control, which can make or break an organization. A cohesive inventory control solution gives you the tools and resources necessary to control quality and understand the quality of your current stocked items. This system gives you greater control over internal business processes, providing the knowledge required to optimize your inventory investments and understand your stock on a deeper level.

Types of Inventory Control Systems

Several types of inventory control systems can benefit your business. Below is a breakdown of some of the most common inventory control solutions.

Periodic Inventory Control Systems

The first option for determining how to control inventory levels is using a periodic inventory control system. If you’re wondering how to control inventory in a small business, this system can be highly beneficial. Periodic inventory systems rely on regular physical inventory counts and update information whenever a new physical count occurs.

With this system, purchases are recorded to a purchase account, and once inventory levels are determined, the balance in your purchase account is shifted to your inventory account. The inventory level is then adjusted to match the cost of your ending stock. Periodic inventory control systems typically use the formula: Cost of goods sold = (Beginning inventory + Purchases) - Closing inventory.

Perpetual Inventory Control Systems

These systems update stock in real-time as purchases are made or new inventory is received. The perpetual inventory control system relies on software to keep track of inventory rather than manual processes, which is more accurate but often more expensive. This system calculates your inventory based on your purchases and sales and is helpful to avoid stockouts, understocking, and overstocking.

What are Inventory Control Procedures?

Inventory control systems determine how you track and manage your inventory – but what are the methods of inventory control and the procedures involved? Let’s take a look at a few ways to determine how to keep a good inventory control.

1. Just-in-time inventory control. This control method occurs when businesses have the least inventory necessary to operate. While traditional inventory control methods involve stocking your inventory in a warehouse, this method only requires you to purchase inventory when needed so that the items arrive “just in time” to meet customer demand.
2. Dropshipping. This method occurs when a business doesn’t receive goods from a traditional supplier but instead works with a drop shipper that delivers orders directly to consumers. With this strategy, you process customer orders but don’t handle the products.
3. Bulk shipments. This method is typically restored for items with consistent customer demand and long shelf lives. Companies buy inventory in bulk to stock warehouses, which costs more upfront but can save money in the long run. If you choose bulk shipping, you should be confident that the products will sell; otherwise, this method can lead to overstocking.
4. Cross-docking. This method occurs at a dedicated cross-docking location, where goods are delivered from suppliers to be prepared for shipment, loaded on a delivery truck, and sent to customers. It’s similar to dropshipping because it can eliminate the need to interact with products or reduce the storage necessary to stock items in your facility.
5. Cycle counting. This inventory control method occurs when teams count small portions of inventory frequently. For example, you might check inventory levels for individual products rather than all items simultaneously to determine whether your inventory levels match the amount recorded in your system. If these levels don’t match, you can conduct an inventory audit.
6. Consignment. Finally, this method occurs when your business orders goods from a supplier but doesn’t pay for the products until they’ve been sold. The supplier is considered the “consignor,” while your business is the “consignee.” If products don’t sell, you can return the items without being charged for unsellable products.

How to Control Inventory Variance

Knowing how to control inventory in retail stores, warehouses, and other locations requires an understanding of controlling inventory variance. Here are some suggestions to get you started:

• Keep accurate record-keeping of your inventory levels. Consider implementing an inventory counting software like Zupan to track stock movements, purchases, and sales.
• Practice cycle counting. Regular inventory cycle counting can identify variances before they become more significant.
• Use demand forecasting to determine products customers are most likely to buy, order the right quantities of products, and reduce overstocking or stockouts that cause variance.
• Have standard operating procedures (SOPs) in place. These procedures will minimize errors during receiving, packing, and shipping processes.
• Use technology to make inventory control easier and monitor inventory variance. Understanding how to use barcodes for inventory control or implementing RFID technology will reduce the risk of manual errors and promote accurate inventory management procedures.

Navigate Inventory With Zupan

Understanding inventory control is only one step in maximizing your inventory management processes. We can help you understand your inventory with inventory counting software to eliminate manual processes and provide more accurate inventory metrics. Learn more today!