Inventory Control 

vs Inventory Management. ... 

Inventory control is a method of regulating the inventory you have on hand in

your warehouse.

On the other hand, inventory management is the activity of forecasting and

replenishing inventory, focused on when to order stock, in what quantities and from
which supplier.

Although they might sound similar, they serve different business objectives.
Both are just as important to be able to run a successful distribution business, but if you
are a new business and can’t budget for both, an Inventory Control system would be first
to look at.

Inventory Control handles the inventory that is already in your warehouse and forms part
of your ERP solution, it’s the transactional layer that allows you to:
• Receive inventory
• Process stock takes
• Process inter-branch transfers
• Process inter-branch receipts
• Pick, pack, and ship stock
• Process purchase orders on suppliers
• Process customer invoices on your sales.

Inventory Control is the supervision of non-capitalized assets (inventory) and stock items

whereas Inventory Management is the strategy for balancing the amount of working
capital that is tied up in inventory with service-level goals across multiple stock-keeping
units (SKU’s).

Inventory Management ensures that you always have the right quantity of the right
product at the right time and in the right location. Inventory Management tools provide:
• Demand planning and forecasting
• Calculating safety stock
• Calculating re-order points
• Identifying fill rate %
• Calculating replenishment stock
• Identifying obsolete items
• Streamline your ordering process
• Optimizing warehouse layout

Let's look at this symbolically - your warehouse is the body, your Inventory Control are
the arms and legs - they do all the hard & physical labour. Your Inventory
Management is the brain which processes all the data from your inventory control and
 turns that data into valuable insights to enable you to make critical business decisions.
These two areas are co-dependent, and although you could use an Inventory Control on
its own, you won’t get the real business benefits as you would if you ran it in harmony
with Inventory Management.

Putting it all together

Your Inventory Management tool takes data from Inventory Control and analyses past
trends, allowing you to identify possible risks in the supply chain which all helps to avoid
over or under stocking.

To achieve better Inventory Management, you first need to improve your Inventory
Control. Once that is automated, it’s advisable to implement a tried and tested Inventory
Management tool to ensure you have the right amount of product on hand to maximize
your profits and minimize your inventory investment.

Understanding Inventory Control

With the onset of various practices aimed to increase the gross output from a company,
the management, and control of everything related to the inventory are in the spotlight.
Thus, paving the way for new techniques and practices to achieve it.

Inventory control is, therefore, an important aspect of maintaining a successful supply

chain for the industry.

In this article, we’ll discuss what is inventory control and the difference between
inventory control and inventory management. We will also see techniques and some
examples of good inventory control.

Even though there is already a misconception regarding the two ideas of inventory
control and inventory management being similar, it is entirely different aspects related to
the inventory.

Let us now look into these terms and understand what makes them different from each
other.

Table of contents:
 So, What Is Inventory Control?
 Inventory Management
 Inventory Control Techniques
 Example Of Good Inventory Control
 The Bottom Line
So, What Is Inventory Control?

Inventory control is another name for stock control, and the name says it all. It is the
practice of generating maximum revenue of the company’s inventory by regulating it and
adopting various practices.

The sole aim can be to increase the profits with the least amount of investment in the
inventory. This fact stands firm without compromising customer satisfaction.

Inventory control also includes being accounted for all the goods and where they are at a
particular moment. Retailers and distributors adopt the prime use of inventory control to
make difference to their profit shares positively.

Areas of influence of inventory control

Let us delve into the areas where inventory control is mainly adopted and followed to
reap more profits.

With the lack of raw materials, it will be difficult for the industries and may even lead to
the stoppage of production. But if an industrialist decides to keep a huge amount of raw
materials in its inventory, it would have to bear the inordinate cost that comes with
maintaining it.

Hence the ideal way to tackle this problem will be to order quantities in small amounts on
a frequent basis to reduce the inventory costs. Thus it shall ensure the steady supply of
raw materials at the same time.

Just like the instance, we discussed earlier, the availability of finished goods also has a
role in inventory control.

The cost of maintaining the finished goods within the company to be able to charge a
high amount to deliver it right to the customers may sometimes increase the cost of
inventory and the pricing premium associated with the product may not have any value.

primary controls within the supply chain

Inventory control thus highlights the optimum storage capacity and the balancing of
finished goods within the company and the backorders.

The use of just-in-time production can eliminate inventory costs within the supply chain
management. The production is carried based upon the customer orders.

Another area where the inventory control system has its power and influence is the
manufacturing or working area where the products are being processed. To reduce
inventory investment, one must reduce the inventory associated with the production
process. Reducing the inventory travel time and reducing the workspace has a very good
effect in this case.

Other steps would be to reduce the size of the job to help in internal logistics and storage.

Another factor that directly deals with inventory control is the setting of reorder point of
inventory level.

This point is the mark where the company or industry decides to reorder the inventory for
production purposes. The problem with the setting of reorder point is that too high a
value can increase the chances of rising inventory investment and setting a small value
can sometimes lead to stock out and disruption in production processes.

All these instances give us insight into the importance of inventory control systems, and
sometimes the companies and industries outsource certain aspects of production to
transfer the burden of inventory control over to them.

Inventory Management
Let us now learn what inventory management system is all about and then delve into the
definitions and their differences with inventory control.

An inventory management system refers to the actions that deal with the management
and maintenance of inventory goods. Their aim revolves around ensuring the products to
be present in the right quantity whenever required and doesn’t directly affect the profits.

Therefore Inventory management can be summed up as having the right stock level and
paying for these inventories according to the order quantity. It also includes knowing
about the reorder point and ensuring the presence of inventory at the right place in the
desired quantity.

Inventory control, on the other hand, focuses mostly on the inventory that is present in
the stocked items. It bothers about the various items within its possession and how much
of it is present with them. Inventory control is also responsible for the knowledge about
where a particular item is placed and everything about the warehouse designs and its
storage.

Therefore, the burden of taking care of the inventory reports in a safe manner lies on the
shoulders of the department dealing with inventory control. Keeping all the inventory
forecasting and stocktaking in an organized and safe manner with the best quality control
measures must be ensured by the inventory control section.
 Inventory management is a part of the supply chain management, which includes various
aspects such as the process of ordering, storing and using the company’s inventory like
raw materials, its components, and the finished products.
It is also used for controlling the number of products for sale. It helps to manage the
inventory and stock of the company.
Inventory management has been defined quite simply as having the right inventory of the
right quantity and place to be sold at the right time with the right cost.
Having effective inventory management helps to ensure that there is a sufficient amount
of stock available at hand to meet the customer demands.
Mishandling of inventory management could result in enormous losses for businesses due
to the unfulfillment of potential sales or overstocking. Inventory management ensures
that such mistakes are avoided.
 
Methods of Inventory Management 
Here are some of the widely used inventory management techniques that are used by
traders and online sellers.
Economic Order Quantity (EOQ)
EOQ is the least amount of inventory that should be ordered for meeting peak customer
demands without running out of stock or producing obsolete inventory. The purpose of
EOQ is to reduce inventory to the minimum and lower the cost of inventory to the least
possible amount. EOQ uses the three variables, viz.,
 Demand
 Relevant Ordering Cost
 Relevant Carrying Cost
 
Minimum Order Quantity (MOQ)
It is the least set amount of stock that a supplier is prepared to sell. In case the buyer does
not agree to purchase the MOQ of a product, then the supplier will not agree to execute
the order.
The purpose of MOQ is to ensure suppliers can increase their profits while selling more
inventory quicker and eliminating “bargain shoppers.”
MOQ is fixed depending on the total cost of inventory including other expenses to be
paid before making a profit. This ensures MOQs help the wholesalers in maintaining
profitability with healthy cash flow.
 
ABC Analysis- is a sorting method depending on the demand for the product and the
expenses that will be incurred to hold the particular stock.
 A Goods – Bestsellers and taking the least amount of storage space
 B Goods – Mid-range but in regular demand and more expensive to store as
compared to ‘A’ items
 C Goods – The rest of the inventory which contributes the least but takes up the bulk
of inventory costs.
  
Just-in-Time Inventory
This inventory is making goods that are needed, when they are required, in the amount
they are required. Many companies hold a small stockpile in case of unexpected demand
for commodities.
Just-in-time Inventory establishes a “zero inventory” system. The goods are
manufactured by order and operate on a “pull” system. The system triggers a sequence of
activities once an order comes through.
The staff gets into the process of either organizing the stock or manufacturing them.
 
Safety Stock Inventory
Safety Stock Inventory is keeping aside a small amount of stock as a safeguard against
the variability of the product in market demand. It helps in preventing loss of revenue,
customers, and market share. The reason behind this is:
 Protection against a sudden spike in demands
 Prevention against incorrect market forecasts
 Safety from stockout
 Buffer against unexpectedly longer lead times
 
FIFO / LIFO
This accounting method helps in valuing your inventory and calculating profitability.
First In, First Out – In the FIFO system, the oldest items in the inventory are sent out
first.
Last In, First Out – In the LIFO system, the newest items in the inventory are sent out
first.
Read more about FIFO Vs LIFO
 
Drop Shipping
In this method, you sell and ship products that are neither owned nor stocked by you. The
benefits of this system are:
 Low cost of start-up and inventory
 A low cost incurred for fulfilling the order
 More scope in testing newer products with minimum risk
Read more about Drop Shipping.
 
Maintaining Reorder Level
This method ensures that you know exactly when you need to order more stock. This
method protects you from market slumps and spikes and ensures that you have the
required amount of stock in hand every month.
Sometimes, there is a high demand for a specific product, which is great for businesses as
it means that you are making profits with each sale, but it also says that your inventories
are coming down at an equally fast pace.
 Reordering before running out of stock also means an additional charge for storage and
delay in ordering means stockout and losing your customers to your competitors.
For calculating the reorder point: –
 Calculate lead time in days
 Account for safety stock in days
 Add lead time with safety stock for determining the reorder point

Learn how to calculate reorder point.

 
Batch Tracking
Batch tracking is using the batch number to track goods along the distribution chain. It is
a highly efficient method as it helps to monitor every aspect of the manufacturing process
from raw materials to finished products, where and how much was shipped and their
expiry date.
 
Lean Manufacturing
In this system, it is ensured that the consumer is given the maximum value of the product
with the minimum waste and maximum productivity.
 
Six Sigma
It is a data-driven process and helps to reduce and finally eliminate product defects. The
aim is to ensure that the final product which reaches the consumers is almost perfect.
In addition to that, the combination of Six Sigma with Lean Manufacturing i.e. Lean Six
Sigma ensures that the waste is removed and there is a reduction in the process variation.
This method ensures that there is an organized manufacturing and flawless product
output.
 
Perpetual Management Inventory
This system tracks the stocked and sold inventory in real time. The accounting system is
updated every time there is an arrival of new inventory, execution of sale, and inventory
used.
 
Consignment Inventory
This is an agreement between the vendor and the vendee, wherein the vendor owns the
goods, and the vendee pays only after the products are sold.
 
Demand Forecasting
This is a method of forecasting customer demand for goods about what, when and how
much they will buy.
 
Managing SKUs (Stock Keeping Units)
 For businesses that sell products, managing inventory through SKU is very crucial. SKU
is a product code, which is unique to the product. It helps in identifying, tracking or
searching it in the invoices, order forms, etc.
SKU can also be used for tracking intangible products which are billed, such as
warranties or repair time of units. The benefits of using SKU are:
 Monitoring inventories
 Stocktaking
 Identifying stock shrinkage
 Replenishing inventory
 Profit calculation
 
Manage The Inventory Lifecycle 
Following are some fundamental techniques for controlling inventory:
Annual Stock Policy
The company management decides the maximum and minimum amount to be
maintained, reorder level, safety stock, etc., at a given period across its various
warehouses.
 
Inventory Budget
It helps in an advance preparation before the inventory is acquired. The budget includes
the total cost of keeping the inventory for the financial period. It includes materials cost,
carrying costs, operational costs, logistics costs, redistribution costs, and any other
miscellaneous costs.
 
Automatic Inventory System
It helps to keep track of the quantity and price of each item in stock.
 
Inventory Turnover
It is calculated for determining the speed at which the inventory is being used. The higher
the turnover ratio, the higher is the sales volume and profitability. It is mandatory to track
every single item in the warehouse for determining the turnover ratio.
 
Optimizing Purchase Procedure
All inventory items left unsold in the warehouses over a period of one year should be
removed from the inventory to eliminate excessive storage costs. Low customer demand
products should also be excluded from the inventory.
 
 
Why You Must Systemize Inventory Management
Tracking of inventory, regularly updating it, using the available data for tracking profits,
demands and sales are essential for any company. For small businesses, an inventory
software can help in building or breaking the business, depending on its ability to keep up
with the sales and demands.
 For managing online businesses or selling on online portals like Shopify or Amazon,
inventory management software helps in keeping track of the various consignments,
sales, etc.
It enables you to track your stock and control the supply, thus ensuring that you can
manage your stock supply without overspending time and money.
If you are dealing with inventory, you should start implementing an inventory
management system. Your business will benefit in multiple ways, like:
 There is an increase in the sale of goods.
 There is an increase in information transparency.
 There is almost a 50 per cent reduction in lead times.
 Lower costs due to accuracy in planning
 High improvement in delivery performance
 Increase in employee productivity
 Up to 10-25 per cent decrease in stockout
 Increase in customer loyalty
 Increase in inventory turnover by optimizing the value of goods

Check out the top inventory management solutions.

 
The Bottom Line
The inventory management system prevents situations where you are either running out
of stock or left with idling capital in warehouses or unable to track your goods. It is best
suited for monitoring stock in real time.
Small businesses usually use MS Excel as a means of managing inventory, but its scope
becomes very restricted to a growing business. 
If you are a trader, wholesaler or a small manufacturer, you should consider investing in a
good inventory management software.
ProfitBooks Inventory management helps keep an updated record of stock movement,
ensuring that you can track every single piece of goods that you have or handle.

Inventory Control Techniques

Different companies adopt various inventory solutions to deal with their problems to
increase the maximize profits.

Let us go through some of the common practices and techniques of inventory solutions.

1) Fixing Of Stocking And Inventory Policies

The industry officials and company management must carefully assess the capacities of
each of the multiple warehouses. They must come up with the stock level of supplies that
can be accommodated in its inventory and limits must be specified. This procedure also
includes the setting of the right amount of reorder points and values and the amount of
safety stock.

2) Budget Preparation For The Inventory

One of the important steps related to inventory control is coming up with the right
inventory budgets. Many companies have annual inventory budgets to address the
financial needs associated with the inventory. This practice gives an insight into the
performance and management of inventory stock in the coming year. To be well aware
of, the preparation is made in advance.

The budget costs include the cost of the materials, the operating costs associated with the
warehouse, transportation and carrying cost, cost of redistribution, fixed overhead costs,
and other maintenance and safety-related costs.

3) Formation Of An Inventory System

Various systems deal with the management and control of inventory. They also deal with
constant inventory tracking and constituents which include the quality and value of its
inventory items.
Inventory optimization follows the practices of Enterprise Resource Planning (ERP) to
come up with the right allocation of resources and maintaining the right amount of safety
stocks. From using various warehouse management systems to carry out process
improvement and easy management to control of the inventory.

  An inventory management software that supervises the working and maintenance of an

inventory will increase the output from such establishments.

4) A Turnover Ratio Of The Inventory

The turnover ratio refers to how quickly the company or industry uses up the contents of
the inventory. The higher value of inventory turnover ratio indicates that the use of
contents of the warehouses at a high rate. It indicates higher sales volume and in turn,
leads to more profit generation for the company.

The decrease in the shelf life of the physical inventory leads to low maintenance of goods
of a short lifespan. In industry, this turnover ratio will fluctuate according to the demands
and market. Hence, a close watch must be kept on such values. The turnover ratio also
helps in fixing the reorder level of an inventory.

5) Changes In Purchasing Procedures

Organizations must adopt certain practices of the purchasing of contents for the inventory
to deal with the inventory control. When certain products do not exhaust for more than a
fixed period, the organization must sell and liquidate. They must utilize space for better
purposes than hoarding it for a long time.

You must consider the patterns of various inventory items before making the purchases.

6) Warehouse Design Management

Categorization of products must be on the basis of their needs and movement and hence
arrange accordingly. The position of a product that is very fast-moving must be closest to
the stacking port. Following which, the obsolete stocks must be farther from the docking
station. Thus the entire area and placement of each good must be in an optimum manner.

Example Of Good Inventory Control

Various department stores in the United States reported an increase in their sales and
margins, for e.g Kohls and Macys’. They achieved this by adopting inventory control by
shunning their inventories.

The fourth straight quarter sales performance increase at both Kohls and Macy’s finds
mention in the report by Moody’s.

Kohl’s entire inventory had fallen more than 6% each quarter since Q4 2017. At Macy’s,
inventories have fallen by more than 4% during four of the past five quarters.

The Bottom Line

Understanding inventory control and taking the right steps to implement it is key to the
supply chain of a successful business. As the business grows, even a small percentage of
inventory loss can substantially make dents in profit figures.

Business owners should systematize the process and use good inventory management
software. One such software, ProfitBooks can help in streamlining purchase order
management, sales orders, and overall supply chain.
What Is the Difference Between Inventory and Stock?
Stock items are the goods you sell to customers. Inventory includes the products you sell, as well as the materials and
equipment needed to make them. Although the definition of stock is concise, there are four main types of inventory: raw
materials, work in progress, MRO supplies and finished goods. 

Stock
Stock includes finished products, parts, materials—whatever you sell to customers. The more stock—or products—you
sell, the more revenue your business generates.

Inventory
Inventory includes finished products and all the assets a business owns or uses to complete production. There are four
main types of inventory.

1. Raw materials 
Raw materials are parts or components used to make a final product. For example, if your company manufactures HVAC
parts, the raw materials used to make fan motors, compressors, or thermostats might include:

 Metal
 Plastic 
 Fiber or other materials 

2. Work in Progress (WIP)

Work-in-progress, or work-in-process, inventory is still in production. Some examples are incomplete goods that require
time to dry, seal, bond, or ferment before they are ready to be packaged and sold. And WIP includes raw materials, labor,
overhead, and other essentials needed to complete production. 

3. Maintenance, Repair, and Operating Supplies (MRO)

Items that support production but are not part of the finished product are MRO supplies. For example, if you’re tracking
medical inventory for a company that manufactures continuous glucose monitors, production might be supported with
these MRO supplies:

 Adhesives
 Calibrators
 Computers
 Gloves
 Packing materials
 Safety glasses

4. Finished Goods
Finished goods are completed products that are packaged and ready to be sold.
Tracking Stock and Inventory
As demand for stock grows, or as stock levels decrease, raw materials and MRO supplies must be available for production.
How can you manage and track your stock and four types of inventory? 

Introducing Sortly—easy-to-use, intuitive inventory management software that tracks stock and inventory, so you know
what to order, how much to order, and when to order it.

Sortly automates inventory control with a bundle of features:

 Tracks inventory with the use of QR codes or barcodes

 Compatible with desktops, laptops, and Android and iOS devices
 Allows you to scan QR codes or barcodes with a Bluetooth scanner or the camera on your mobile device
 Generates new QR codes or barcodes and connects to printers for smooth label production 
 Makes it easy to upload CSV files using your existing spreadsheets to help minimize manual product entries
 Offers upgrades to scale with your business
 Provides real-time status of your stock and inventory
 Tracks inventory across multiple business locations
 Customizes reports that you can save, share, and print
 Features multi-user access for sharing data with clients, customers, or employees