Inventory Control,The Ultimate Guide


Behind every successful business there are great control procedures and systems that ensure the success of the business. Among these systems, the most important system is a good inventory control system for businesses with physical stock.

Inventory or stock control helps businesses ensure that stock is always available for sale and use. It ensures that a business never runs out of stock whenever there is a demand for the stock and stock is ordered when the stock levels are down to meet any future demands, Furthermore, a proper inventory control system ensures that business has proper level of its stocks and there are proper procedures in place to manage the stocks effectively.

Inventory Management Systems

There are two types of inventory management systems, perpetual inventory system and periodic inventory system. In the perpetual inventory system stock items are recorded in the inventory account whenever there is a stock related inventory transaction. In the periodic system, inventory is physically counted at the end of a period to derive closing inventory and cost of goods values for the business.

Perpetual inventory system makes it easier to track any deficiencies in the stock of the business because it can readily identify and correct these deficiencies because the inventories of the business are constantly updated. Under periodic inventory system, inventory is updated after a period and, therefore, any irregularities are harder to trace.

Inventory Control Techniques

There are some effective techniques that businesses must follow to ensure an effective inventory control system.

Stock Levels

An effective inventory control system must define different stock levels for a business. It should define the optimum stock level which is the level of stock that businesses want to keep for daily operations. This takes into account the expected demand, the lifespan and storage costs of the stock. If a business has more than one type of stock, the optimum level is set for every type of stock.

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Furthermore, an effective inventory control system must define minimum inventory levels. This is the minimum level of stock that the business must keep at any time. Before the minimum inventory level, a business must also define a restock inventory level, which is the level of stock at which new inventory is ordered. This level is determined by the size of the order and delivery times.

Businesses can also forecast their inventory usage to help better manage levels of inventory at different times.

Proper Storage

An inventory control system also defines the storage of the stock to reduce any chances of fraud or error. Moreover, it also establishes the physical location of all inventory items clearly. One way, the inventory control system can help with storage is by identifying stocks with frequent demand and putting them in a more accessible locations to make them easily accessible to employees.

Perform Regular Physical Count

A proper inventory control system will require businesses to perform regular physical stock counts to reconcile any differences with the books of the business. While a system like perpetual inventory system may provide up-to-date information, it still can’t guard against human error or fraud. Regular physical counts of inventory also help businesses identify any damaged or slow-moving inventory.

Automated Inventory Management

Businesses can use automatic software and integrate it with different other systems such as the Point of Sales (PoS) systems to track inventory easily. These automatic systems can also be programmed to automatically track inventory levels and notify the management when the levels are low.

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Batch Tracking

To control the quality of the inventory, businesses can use batch tracking to keep track of inventories of similar traits. This can help with quality control as defective inventory can be tracked back to its batch. Batch tracking is used in industries such as the pharmaceutical industry where inventories are produced in batches and have similar characteristics.

Advantages of Effective Control

An effective system of inventory control has many benefits for a business, as follows:

  • It helps businesses reduce inventory costs and increase sales by establishing different levels of inventory.
  • We can ensures inventory is present when there is demand for the inventory.
  • Businesses are able to keep track and reconcile any irregularities in inventory on time.
  • It helps businesses automate manual tasks.
  • The effective system ensures that businesses gain the satisfaction of customers.
  • It helps identify any instances of possible fraud or error.


An effective inventory control system can help businesses in different ways. The two main inventory management systems that businesses can use is the perpetual and periodic inventory management systems. Furthermore, businesses can use different inventory control techniques to ensure the effectiveness of the inventory control system.

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