Inventory control (stock control): Definition, systems, and management

Inventory control definition

At first glance, inventory control and inventory management seem similar. After all, they both cover similar bases revolving around the question, “How much stock should I order?”

Although these two terms are often used interchangeably, they actually deal with different aspects of inventory optimization.

Inventory control involves warehouse management. This includes:

• Barcode scanner integration
• Reorder reports and adjustments
• Product details, histories, and locations
• Comprehensive inventory lists and counts
• Variants, bundles and kitting
• Syncing stock on hand with sales orders and purchase orders

The goal of inventory control procedures is to maximize profits with minimum inventory investment, without impacting customer satisfaction levels

Inventory management, on the other hand, is a broader term that covers how you obtain, store, and profit from raw materials and finished goods alike. The right stock, at the right levels, in the right place, at the right time, at the right cost.

Inventory control systems and management

Keeping control of your stock so that you’re able to hold the least amount of inventory in your warehouses makes for easier organization, lower holding costs, better cash flow, and more space within your warehouses. When it comes to inventory control procedures, less is definitely more.

To do this, two formulas stand out:

Economic order quantity (EOQ)

EOQ is the optimum inventory you should purchase to minimize the costs of ordering and holding. You’ll need to know your annual fixed costs (D), demand in units (K), and carrying costs per unit (H).

EOQ = √(2DK / H), or the square root of (2 x D x K / H)

Try it for yourself using our free EOQ calculator below:

To save you time on doing the math manually for every single item in your inventory, we've built a free EOQ calculator just for you.

Reorder point formula

The Reorder point determines the right time to order more stock. Calculating this means adding together your lead time demand in days and safety stock in days:

Once you have your optimal stock levels set, make sure that your inventory doesn’t go too low by keeping an eye on stock movements and tracking orders as they come and go.

Any inventory control system worth your time will combine EOQ and reorder points with low-stock alerts to send notifications automatically.

Organizational control

It may seem like a simple concept, but it really does make a difference to have your stock meticulously organized. This includes labeling your stock with SKUs that are easily understandable and simple to read. Start with an initial stocktake and then use the right inventory management techniques to keep track of movements and levels.

Quality control

Quality control is another essential part of inventory control. Choose a supplier that has the same quality standards as you do and get plenty of samples before you develop a long term relationship. Once you have your suppliers, batch tracking ensures your stock consistently meets your highest quality standards.

Control the future

Even with EOQ and reorder points set, anticipating future demand is notoriously difficult. To avoid obsolescence and spoilage, inventory forecasting must be utilized to keep inventory levels low yet adequate to match customer demands. Even big players fall victim to improper inventory forecasting.

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