Inventory Control: Definition, Best Practices, and Methods

Inventory Control: Definition, Best Practices, and Methods

If you’re in the business of selling products, the chances are that you invest a significant portion of your capital in inventory. In this setup, there are several moving parts that you need to keep a watchful eye on to achieve optimum operational efficiency. For example, you have to track what items are going off the shelves and which ones are coming in to restock. You also need to identify the optimal quantity of products to keep in stock so that you don’t incur extra costs. What’s critical, then, is that you have the right inventory control strategies in place and can keep stock to a minimum while improving customer satisfaction and order fulfillment levels. 

In this article, we cover everything you need to know about stock control, including a set of the best practices that’ll optimize your stock levels. Whether you’re running an ecommerce business or a brick and mortar store – or a mixture of both – getting a handle on inventory is essential. 

What is Inventory Control? 

Inventory control, also referred to as stock control, is the process of optimizing inventory levels to ensure an adequate supply of goods is available to meet customer demand. Its purpose is to ensure you’re not overspending on stock or running the risk of stock-outs, and it provides item-level visibility to help you cut the time spent on tracking and reordering products. With appropriate warehouse management and stock balancing processes, inventory control maximizes sales and profits while keeping storage costs low.

what is inventory control

Any business that sells products will require inventory control in some form, such as retailers, manufacturers, distributors, and wholesalers. Depending on the nature of the business, the practice of stock control may require the owner to take more than just finished goods into account. Manufacturers, for instance, will track raw materials and work in progress stock as well. For now, we’ll focus on inventory control for retailers since most of our readers sell products directly to end-users.

What Are The Inventory Control Objectives?

The main inventory control objective is to help you extract the maximum amount of profit from the least amount of inventory investment without compromising customer satisfaction. Besides that, stock control allows you to:

  • Address fluctuations in demand by keeping adequate safety stock
  • Eliminate the risk of loss due to deterioration or obsolescence
  • Maintain accurate records to protect against theft and wasted leakage 
  • Optimize the different costs associated with inventories, such as packaging and carrying costs

Finally, inventory control enables you to analyze consumer demand trends so you can make profitable decisions for your business. When you see which items are short in supply and which ones generate excessive inventory, you’re able to replenish quickly and dispose of things that are bringing in very few orders.

Inventory Control Vs. Inventory Management: What’s the Difference?

Many retailers use inventory control and inventory management interchangeably. However, they’re two different terms, and each of them serves a specific purpose. 

Inventory control involves the regulation of the inventory that’s already present in a company’s warehouse. This regulation includes knowing where to locate each item in the warehouse, what quantity to stock, and what type of layout will work best for order fulfillment. Your company may also rely on stock control to minimize backorders by optimizing your stock in relation to sales. 

inventory control vs inventory management


Inventory management, on the other hand, is the high-level supervision of inventory, from raw materials to finished goods. It includes negotiating and managing product prices, strategically selecting suppliers to maintain stock levels, long-term forecasting and procurement of inventory, and more. In other words, inventory management is the oversight of stock right from product sourcing to order fulfillment.

It’s worth mentioning that inventory control is a part of inventory management. It minimizes the total cost of inventory while inventory management bridges the gap between sourcing products and getting them to customers in good condition. Put simply, inventory control is a critical component of inventory management that helps you streamline stockroom or warehouse operations.

Inventory Control Methods for Operational Efficiency

Now that you understand the importance of inventory control, let’s take a look at a few techniques you can apply to maximize efficiency and profitability.

1. Classify Your Stock Using ABC analysis

This inventory control method determines which products you need to reorder frequently and which ones you don’t need to stock that often. It works by sorting your inventory into three categories – A, B, and C. Category A includes your best-selling, high-value items that require frequent reordering. Category B consists of medium-priority stock and typically requires bi-monthly reordering. The last category, i.e., C, includes unpopular goods that require minimal reordering. Working with your suppliers to prioritize the supply of category A items while replacing some of your category C goods with higher-value stock will help you run a more profitable retail operation. 

2. Avoid Stock Loss with The FIFO (First-in, first-out) Approach 

FIFO (First-in, first-out) is one of the more common inventory control methods for reducing stock holding expenses. It requires you to fulfill an order with the product that has been sitting in the stockroom the longest. Basically, the stock that arrived in your stockroom first does the job of making sales. While this can help you avoid spoilage if you’re dealing with perishable items like food products, it’s also a good practice for non-perishable goods. Things like features and design can change over time, so it’s better to sell the older stock of any fast-evolving products you may have before it becomes obsolete. 

first-in, first-out stock control

3. Build a Strong Relationship with Your Suppliers

Doing so can help you avoid stock-outs and keep inventory levels at par. One of the best ways to build great relationships with your suppliers is to keep lines of communication open. For example, when suppliers are extremely busy overcoming supply barriers, consider dropping them a text on WhatsApp rather than sending a lengthy email – they’ll appreciate you for considering their schedule. Likewise, give them your Skype, Facebook Messenger, and other contact information to ensure they’re able to communicate production status, delivery channels, or anything else they’d like to share on the fly. Using this approach will make it easy for you to let them know when you’re expecting an increase or decrease in demand so they can adjust production accordingly. 

4. Find Alternative Resources for Maintaining Optimum Inventory Levels

Your suppliers are vital to achieving and maintaining target inventory levels. What happens, though, if one of them goes out of business or the modes of transport they’re using get suspended? Your stock levels suffer, your customer satisfaction levels go down, and your business experiences a loss in potential revenue. Fortunately, you can avoid all of this through alternative resources that allow you to buy inventory. Exchange, for example, provides you with an option to acquire inventory-based businesses so that you can prevent stock-outs and maintain an optimal level of inventory. You can use this resource to find inventory for several types of businesses, including pet products business, women’s clothing business, dropshipping business and more. 

buy inventory online

5.  Create Reorder Points to Meet Product Demand

Another inventory control technique is when a company defines the minimum quantity of stock they should have on hand before reordering stock. Also known as a reorder point, the quantity is established for every product category because some items sell faster than others. So, in the case your stock level for a particular item is about to reach the reorder point, you should look to replenish it immediately. Effective reorder points ensure that your inventory doesn’t dip below your desired stock levels. It also saves you money by minimizing the amount of inventory in stock without affecting customer satisfaction levels. Although your stock levels might be low as you approach a reorder point, you should have enough inventory in stock to fulfill incoming orders and ensure that your cash flow stays steady. 

6. Use the JIT (Just-In-Time) Technique to Reduce Waste

The JIT (Just-In-Time) technique is an ideal inventory control strategy for small businesses that don’t have the means to purchase large amounts of stock at once. It involves receiving products from vendors when and as required, allowing you to maintain healthy cash flow. Businesses can also employ this technique to decrease waste and minimize the need to replace old stock. A faster turnaround of stock prevents items from becoming obsolete or damaged while lying in the storage room. For this strategy to be effective, you need to have an excellent relationship with your suppliers as both lead time and the delivery cost will impact your ability to fulfill customer orders.

7. Keep Safety Stock to Protect Your Business Against Uncertainty 

This inventory control method involves holding a bit more stock than what you usually require as a buffer against uncertainty. With safety stock, you eliminate the risk of losing customers from stockouts. It’s also beneficial if you’re experiencing problems with a supplier, such as long lead times and uncertainty of the future supply of a specific item. To keep costs to a minimum, safety stock for products with a declining consumer demand should be kept to a couple of extra units to mitigate the risk of inventory surplus and obsolescence. Additionally, make sure to consider the impact of certain seasons on your business. Your safety stock requirements could increase around the holidays as consumers increasingly shop during those months (while suppliers often struggle to offer shorter delivery items). 

stock control

8. Minimize Aging Stock with Product Bundling

Aging stock consists of items that are either in low demand or slow-moving. Liquidating these items is a challenge for businesses as they’re often outdated in terms of consumer preferences and features. One way to release the cash tied up in aging stock is to use product bundling. This marketing tactic is where you group products together to create a package sold at a lower price than buying individual products separately. You can bundle some of the aging stock with your best-selling items at a reduced cost to convince customers that they’re getting a great deal. Use common sense and sales insights to group inventory duds and customer favorites to minimize the amount of aging stock on your shelves. A pro tip is to look for aging items that would serve as great compliments to your best-sellers and offer them as part of a discounted bundle.

9. Consider Investing in An Inventory Control System

Most businesses rely on spreadsheets and antiquated technology platforms to drive their inventory control processes. Of course, this requires continuous manual oversight that no growing business wants to deal with. Those looking to gain a step on inventory control need to evaluate automated systems that can support leaner stockroom operations to save time and maintain adequate stock levels. Specifically, an inventory control system can give you control over all aspects of stock, old and new, from the moment it enters your storage room until the time it leaves. Available options include systems that offer barcode scanning, location tracking, reporting, labeling making, and more to help your business control its inventory efficiently. Plus, as your business grows, these systems can help you make data-informed decisions to help increase sales, such as how much inventory you should have across your sales channels at any given time. 


A huge part of the success and growth of a business is its ability to control its inventory. Knowing what you have, where you can locate it in your storage room, and how to work with suppliers effectively is the pillar of your company operations. The strategies mentioned above will help you improve every aspect of your inventory regulation from eliminating stockouts to improving your decision-making. Also, you’ll be able to retain your hard-earned customers by meeting customer demand quickly. Good inventory control ensures that you have the right stock levels in place to fulfill orders efficiently. When you master this aspect of your business, you’re able to deliver better customer experiences.