Inventory control system

 

Inventory control system

What is Inventory Control?

Inventory control or stock control is the process of keeping track of and managing a company’s stocked goods across its warehouse and other storage locations. It consists of procedures that monitor the movement and storage of goods to help businesses maintain a sufficient supply in good condition while meeting customer demand.

The four popular methods of inventory control involve:

• ABC analysis
• LIFO and FIFO
• Batch tracking
• Safety stock

Establishing an inventory control system empowers businesses to satisfy customer demands and maximize profits.

Key Elements

Inventory control is a key element of an inventory management system. Warehouse managers and production planners should adhere to the following activities and procedures in controlling their inventory:

• Receiving, storing, and transferring goods
• Placing items in strategic locations
• Tracking inventory items and their locations in the warehouse
• Documenting product details and histories
• Monitoring the condition of items in stock
• Fulfilling purchase orders with stock on hand
• Integrating barcode scanners
• Forming reorder reports

Inventory Control vs Inventory Management

Although these two concepts go hand in hand, there are slight differences between inventory control and inventory management. Inventory control handles existing stock in a warehouse, while inventory management involves the overall movement of goods across supply chains.

To quickly define, inventory includes all the goods and products of a company that are ready to sell, along with the accounting of raw materials required to produce these goods. The table below compares the two processes against their scope, goal, areas of concern, and actions.

	Inventory Control	Inventory Management
Scope	Existing inventory in the warehouse	Raw materials and finished goods during the entire production lifecycle
Goal	Ensuring stocks in the warehouse are enough and in good condition	Having the right inventory in the right place, at the right time, and with sufficient quantity
Areas of Concern	What items are in the inventory? Where are these items located in the warehouse? What is the condition and status of these items?	Which items should you order? How many items do you need to order? When should you order these items?
Actions	Receiving, storing, and transporting inventory Checking stock items for their expiry dates, spoilage, quality issues, and so forth	Predicting customer demands based on previous data Reordering and managing inventory items in the supply chain

Types of Inventory Control Systems

An inventory control system is a technology-driven method for managing and tracking inventory, which includes raw materials, components, and finished products. These systems help businesses monitor stock levels, order quantities, and storage locations, ensuring that they have the right amount of stock at the right time.

There are two main types of inventory control systems: the periodic and the perpetual system. Choosing the right inventory control system will depend on the business type, size, and kind of inventory. This section discusses these two types in detail, covering their pros and cons, as well as what they’re best for.

Periodic Inventory Control System

The periodic inventory control system pertains to a recurring count of goods at specific intervals. In this system, warehouse managers manually count their inventory on a monthly, quarterly, or annual basis. The exact period depends on an organization’s needs and business activities.

• Pros: It’s relatively simple and easy to manage for smaller inventories. It doesn’t require any specialized technology and equipment, making it easier to train individuals in.
• Cons: It becomes a lengthy process for companies with expansive inventories. The manual counting process is also highly prone to human error.
• Best for: The periodic system is ideal for small companies with minimal inventory. It also works best for businesses selling niche products and counting larger-sized goods.

Perpetual Inventory Control System

The perpetual inventory control system provides an accurate count of inventory levels in real-time. It utilizes technology, such as barcodes and Radio Frequency Identification (RFID) tags, for tracking products. The information is then logged in a centralized database that warehouse managers can easily access.

• Pros: This method removes the need for manual counting. It gives warehouse managers a snapshot of their inventory counts over a specific period of time. Doing so drives data-driven decision-making for sales, ordering, and inventory management.
• Cons: An inventory control software can be expensive to maintain. Moreover, it might not capture discrepancies due to product theft, loss, damage, and scanning errors.
• Best for: The perpetual system works best for companies with multiple locations. It’s also great for businesses maintaining large inventories.

Inventory control system