December 30, 2022
Swathi v prabhu

A guide to inventory control

Inventory control is an essential feature of every business organization. Especially those who are involved in multichannel retailing, wholesale, and e-commerce functions. Finding the proper method of maintaining inventory in a business with the least amount of loss becomes important for any business.

Learning the right methods, and techniques and following an effective guide in maintaining a good inventory system vital for any business organization that deals with huge stock of inventory.

In this article, we will provide some important tips and a guide to inventory control in an organization. But before we get into that, let us understand inventory control and why is it important

About inventory control

Inventory control, also known as stock control, is the process of determining whether the right amount of supply is available in an organization to meet the demand of the customers. With the right amount of internal control and procedures, this practice ensures that the right amount of inventory is available to meet the demands of the organization and ensure financial elasticity.

Inventory is a vital part of any business. In any balance sheet of the company, inventory is known to form a major part of the assets of the entity and uses a lot of working capital. Having the right inventory control can help avoid major problems such as costs related to buying too much inventory and the nightmare of going forward without any inventory.

Small businesses can more or less function with just-in-time inventory management, but the bigger the business; the more things need to be decided in advance. In this case, a certain amount of planning needs to be done and a carefully curated guide to inventory control has to be made.

Let us go ahead and understand the different types of inventory control systems

Types of inventory control systems

Although, there are many types of inventory control systems, the two main ones used in many businesses today, are as follows:-

1. The periodic inventory control system is a system where the inventory is counted and recorded at specific intervals. With most businesses, inventory is counted monthly, but it can also be quarterly, semi-annually, or annually.

The advantage of periodic inventory control is that it is simple and easy to implement, which makes it most effective for small businesses. However, this system is less accurate than perpetual inventory control which may lead to stock-out situations.

2. Perpetual inventory control

Perpetual inventory control is a system where the inventory is continuously recorded and counted in real-time. This is usually done with the help of software incorporated with the company’s point-of-sale.

This system of counting inventory is much more accurate than periodic inventory control. However, this system is much more complex to understand.

This type of inventory control system is appropriate for companies that have many branches, are of a much larger scale, and sell fast-moving consumer goods, which usually have tight inventory control.

In recent times, with the advent of technology, online apps have become very efficient in tracking down inventory. One such app is the Swipe app, which has been rated as one of the best apps for tracking inventory. Some other functions of this app are GST invoicing, POS billing, and creating invoices.


Methods and techniques of inventory control

Businesses use many different types of inventory control methods and techniques, however, if we had to sum it up, the most common ones used in the business are as follows:-

1. ABC analysis

ABC analysis is the process of dividing inventories into three categories on a priority basis:-

The “A” category- these items are the most important and must be given top priority

The “B” category- these items are important but not as important as the category A items

The “C” category- are least important of the other two and is given less priority

Applying this particular technique helps businesses and inventory managers focus on items that impact the business the most


2. LIFO and FIFO

LIFO- Last in, first out, is an inventory valuation method, where inventories that were in stock the longest are sold first

FIFO- First in, first out, is an inventory valuation method, where inventories that were newly in stock are sold first


3. Batch tracking

In this type of inventory valuation method, the inventories are grouped into batches or lots and each batch is given a unique identifier. This can be a barcode, lot number, or serial number.

This inventory valuation technique allows batch owners to keep track of:

a. Where the inventory is coming from

b. Where the goods are headed

c. When the items might expire


4. Safety stock

Safety stock refers to a certain percentage of stock that is kept in hand to meet unforeseen circumstances in the supply chain or unexpected demands of the customer.

Maintaining safety stock can help businesses avoid stock out and lost sales. However, carrying too much safety stock can tie up working capital and lead to inventory management issues.

Some important tips to get started with inventory control

Some of the essential tips to get started with inventory control are as follows:

1. Evaluate your inventory needs regularly

2. Develop a system for tracking inventory levels and movements

3. Monitor inventory levels closely and adjust them as needed

4. Make sure that your inventory management system is integrated with the accounting and POS system

5. Check inventory levels regularly and take corrective actions whenever

 By following these important steps, you can develop a good inventory system that helps run your business smoothly without any hassle.


1. What are the Four Types of Inventories?

The found main types of inventory are raw materials/components, WIP (work in progress), finished goods, and MRO (maintenance, repair, and operation supplies).

2. What is the Inventory Control Process?

Inventory control processes are the processes and techniques used to manage a business’s inventory. These processes help ensure inventory is stocked to the right levels, doesn’t expire or cost too much to store long-term, and is available at the right location and time.

3. What is the Purpose of Inventory Control?

Inventory is a major cost for businesses. In addition to the cost of the goods, companies have to pay for storage and the related real estate, staffing, and utilities to keep those items available. Inventory control aims to optimize inventory so you’re not overstocked or understocked for any specific item.


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