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What is Inventory Control? – Definition & Common Systems

What is Inventory Control? – Definition & Common Systems

What is Inventory Control?

Inventory control can spell the difference between success and failure with your business. Proper control can help maximize your profits while maintaining minimal stock in your warehouse. Indeed, getting to that point of inventory management perfection is the holy grail for most companies. So what is inventory control, and how can you implement it within your own business?

What is the meaning of inventory control?

Inventory control refers to the methods and techniques used to find the minimum amount of inventory needed to keep your business running smoothly. The keyword here is “minimum”. It allows you to avoid tying up your capital in excess inventory.

To completely define this action, we first need to clear up some confusion. People often interchange the effective management of your inventory and inventory control. The fact is that these are related but different.

The inventory control definition limits it to optimizing stock levels. Inventory management, on the other hand, is a much broader term that deals with the entire process of procuring, monitoring, and selling of your stock.

Elements to note about inventory control

The big bulk of this management technique is managing your warehouse operations effectively. At its core, it requires keeping an accurate and comprehensive count of your inventory and stock levels, including detailed information and histories of all your products. You need to maintain proper syncing with your stock levels and future purchase orders.

Most of all, you need inventory data to know how much stock to order at the right time, to ensure maximum profit. Knowing the correct order levels forces you to rely on historical sales data to make an educated estimate.

This is summed up with Economic Order Quantity, or EOQ. This is the quantity you need to purchase for a given stock, taking into account your fixed costs, how much the product is in demand, and the cost to keep that item in inventory (called the holding or carrying cost).

However, forecasting is a science as much as it is an art. Demand can be notoriously fickle, and any quick change and can throw forecasts off dramatically.

Proper control of your inventory requires a delicate balance. You don’t want to be out of stock when a customer places an order, but you also don’t want to be overstocked, either. That ties up your funds to your stock, which is better used elsewhere in your organization.

Inventory control is a complex process that involves several key processes to ensure it runs smoothly. Going beyond that, it also needs good coordination and organizational control to successfully pull off.

Benefits of effective store inventory control

Effective inventory control is an integral part of your stock management initiatives and will ultimately influence your bottom line. Surprisingly, many companies struggle with this concept. Even large firms like Walmart fail to get it right. They’ve reported leaving up to $3 billion worth of sales on the table because of stock-outs.

Inventory control is a two-way street that benefits both the business and the market it serves. Keeping optimal stock levels ensure that your customers can always purchase the things they need when they need them. Many people will switch brands because of poor customer experience, and out-of-stock situations contribute to those disappointments.

More than servicing your market, proper inventory control can save you a lot of money. Remember that your inventory is an asset your business owns until you sell it. Anything that happens to those stocks will incur an expense on your end.

The biggest offender: spoilage

Spoilage is the number one problem solved by proper inventory control. This is especially crucial if you deal with perishable goods like food. You don’t want to order excess inventory that you can’t sell on time, as it will spoil and show up as expenses.

Then there are issues like missing items in your inventory due to mismanagement, or worse, theft. Having a tight control on your stocks means you can detect these issues early on and stop them before they grow into a bigger problem.

Keep storage in mind, too

There are also storage costs to consider. For example, items that need to be kept at cold temperatures (seafood, for example) will incur electricity costs from refrigeration.

But the best benefit of inventory control is that frees up your capital that would otherwise be invested in your stocks. These are funds that are best reinvested in other business activities, like marketing for example. Remember that the goal of your inventory is to get the minimum stock quantity to get the maximum profit. Getting the biggest stock quantity is not the way to get there.

Methods for inventory control

To successfully control your inventory, you can rely on several methods and techniques. Here are some of them, from the simplest to the more sophisticated:

Manual Inventory

This is the most basic inventory control method there is. It’s nothing more than setting aside a team to manually count your stocks and updating your management system. Sometimes, this is as simple as a spreadsheet. Manual inventory is often done annually or monthly.

While simple to implement, this approach to inventory control is prone to errors and takes a lot of time. That’s why it’s more suitable for smaller businesses with simpler operations. For more sophisticated companies, it can be counterproductive to track inventory this way. 

Cycle Counting

Cycle counting is an inventory control technique where, instead of counting your entire inventory, you only check a portion of it. You then repeat the process at a later date but check a different portion each time. Done regularly enough, it can give a good enough overview of your stock levels without spending too much time on it.

Cycle counting is convenient, and the results are surprisingly accurate. The key to cycle counting is to do it frequently.

ABC Counting

ABC Counting is an inventory control technique that prioritizes products on your inventory based on specific criteria. You then categorize these high priority items together into groups from A-C, hence the name.

This counting technique makes use of the Pareto Principle when categorizing items. This is a well-known principle which states that 80% of the results come from 20% of the effort or work. Applied to inventory control, you’ll find that 80% of the sales come from roughly 20% of your inventory.

It’s this fast-moving 20% that you should put into the A group. Stocks in the A group are counted more regularly since they’re “mission-critical” items that need to always be in stock. Slow-moving inventory items in the B and C groups are counted less frequently.

ABC counting saves you time and is incredibly efficient since you focus most of your effort on only the stocks that matter most.

How to choose the right inventory control system for your business


Visibility is the name of the game with any approach to inventory control, meaning you must be able to quickly locate any item in your warehouse. You need real-time, correct data at your fingertips to be able to make correct decisions in a snap.

That’s why any system you pick should have a stock location function as its core. It not only shows you the details of a specific stock but also where it is in your warehouse layout. This allows the fulfillment department to locate and prep the item for shipping in the fastest time possible.

Lot Tracking

Lot tracking is also a critical component of a sound inventory control system. For example, you need to be able to know if a particular stock has been tagged for returns. Tracking is also vital if you have perishable food items to adhere to food safety protocols. And when you need to do product recalls, knowing which stock belongs to which lot can make the process easier.


Forecasting is another area where having the right tools and data is vital. The system should be able to predict and alert you if stock levels are at dangerous levels. Advanced systems can even purchase inventory if they are at alarming low quantities.


But one of the most crucial factors of an inventory control system is its ability to integrate well with other systems in your organization. Coordination is everything with inventory control. The sales team, for instance, needs real-time information on stock levels, so they know which items to push. In turn, inventory control can get valuable data from the sales team to help predict stock levels.

Not having tight integration with your other business functions can be harmful to your inventory control efforts. 


Beyond these basics, an inventory control system needs to be accessible through a variety of platforms. That way, a manager can view data on their computer at the office, while staff can simultaneously update inventory in the warehouse via apps and barcode scanners.

Proper inventory control is a must for any business, and you need the right tools to master it. That’s why we’ve included robust inventory control features into our innovative enterprise POS platform. Get in touch with us today and see how our POS tools can help your bottom line.