Understanding Inventory Control, its Importance, and Best Practices

Between shifts in consumer demand and increasing pressures to lower costs and speed up the entire supply chain, managing inventory levels is a tough, ever-changing job. You must be able to optimize stock levels while maintaining flexibility and making accurate predictions.

Fortunately, the rise of technology and analytics has made managing this easier than ever before. Ecommerce businesses that take advantage of real-time supply chain data will reduce costs, improve customer satisfaction, and ultimately take a proactive approach to inventory control.

What is inventory control?

Inventory control is the process of optimizing inventory storage to ensure a business has the ideal stock levels needed to fulfill customer orders on time.

Also known as stock control, inventory control allows brands to keep only the necessary units on hand without spending too much money upfront or sacrificing customer satisfaction.

Inventory control vs. inventory management

Though very similar, inventory control is one part of inventory management.

Inventory control is focused more at the operations-level and very involved in warehouse management , from scanning in new items in real-time on the warehouse floor to preparing units for kitting and assembly.

Inventory management is the high level oversight of inventory, from raw materials to stocked goods. It includes ordering and restocking, strategically selecting locations and facilities to store product, inventory forecasting, and more.

Inventory management software generates reports, automates tracking, and helps to identify areas of improvement. An inventory management system helps with inventory control across stores and warehouses.

4 reasons why inventory control is important

When you get inventory control right, you reduce costs, free up capital, improve warehousing, and keep customers happy. Here are a few ways inventory control helps ecommerce businesses.

1. Keeps counts accurate

Inventory control provides an accurate reflection of all units on hand. The best way to do this is by using a digital system that electronically scans in both new inventory and the retrieval of each unit picked in an order. This way, real-time stock levels can be reported on at any time.

2. Helps you make the right inventory management decisions

Inventory control is more than just tracking inventory. It also takes inventory turnover into account, or how quickly inventory is sold and replaced in a specific time period. Sales are never going to be 100% linear, so you must continuously measure changes over time to adjust the rate and quantities at which you replenish.

Inventory control helps connect the upstream activities of purchasing and manufacturing to the downstream activities of sales and product demand to prevent bottlenecks, speed up processes, identify slow-moving or obsolete items, and even help evaluate suppliers.

3. Eliminates write-offs

Inventory control directly affects inventory accounting, which measures the changes in the value of inventory and costs of goods sold over time. Proper inventory control prevents write-offs for inventory that no longer has value by reducing waste, making it easy to calculate inventory value, and helping your bottom line by only carrying inventory that you need.

4. Ensures you have enough units to fulfill orders

Proper inventory control aims to let you hold the least amount of inventory in your warehouse(s), yet enough to keep up with demand. This accounts for safety stock, as the last thing you want to do is fulfill orders late or keep customers waiting. Inventory control and demand forecasting go hand in hand — you won’t be stuck paying high storage costs, but you also won’t add the dreaded “out-of-stock” message to your product page.

6 essentials of inventory control

Inventory control impacts your sales, operations, customer satisfaction, and bottom line. Having an inventory control system in place helps refine your operations and understand the best cadence for purchase orders. Here are the key components.

1.  Real-time inventory tracking

Inventory tracking refers to monitoring stock levels and knowing where individual products are stored in a warehouse. Inventory tracking must be done in real-time so that you know how much product can be shipped if a customer ordered an item now, make fast decisions if you need to send units elsewhere, and communicate any delays if items are out-of-stock.

2.  Reorder points

Reorder points establish the stock level at which you need to order more inventory to prevent stockouts. This is done for each individual SKU since some products will be hot sellers and others will rarely sell. Automating this process means less manual monitoring and more timely ordering.

3. Quality control

Quality control helps you stay on top of suppliers, monitor each batch of inventory, make better decisions around future purchase orders, keep customers happy, and meet any regulatory requirements. Inventory control makes quality control a lot easier. When you know exactly how many units you have and where each unite of inventory is located, you can react in the event of a product recall. You can also cross-reference that your records match up to actuals.

4. Designating stocked and non-stocked items

Whether you run a seasonal business or a high-growth brand, your inventory needs will change throughout the year. For example, an apparel company will likely not stock winter coats in early summer since it wouldn’t be cost-effective. However, some clothing items will need to be stocked year round like jeans or t-shirts. Non-stocked items, or those that will be sold on an inconsistent basis, will require a different process of inventory control.

Not all SKUs are the same and won’t need to be ordered in the same quantities or replenished as quickly as others. You may even find you should discontinue certain SKUs that are costing you a lot of money throughout the supply chain but bringing in very little revenue.

5. Zoning

If you keep order fulfillment in-house (and don’t outsource fulfillment), you will have to invest in the infrastructure to scale your warehouse for greater efficiencies. For businesses that have a high SKU count and diverse product catalog, zoning can be critical to keeping your products organized and easy-to-find.

How you store items, the layout of the warehouse, and the proximity of certain items will impact operations, picking lists, and productivity. Zoning helps designated spaces for specific areas, such as those requiring refrigeration, storing dangerous goods, separating out the same product by lot number or expiration date, or simply keeping SKUs that are bundled or ordered often close to one another.

6. Audits

Inventory control provides the ability to audit inventory in a streamlined way, so you can discover potential issues quicker or before they arise. With a well-organized space, stringent record-keeping, and inventory management software, you can regularly audit and automate stock levels for better inventory control.

How ShipBob’s platform makes inventory control easy

ShipBob is a third-party logistics (3PL ) company that provides integrated inventory management software in addition to a network of fulfillment centers where ecommerce brands can connect their online store(s) and send their inventory for ShipBob to store, pick, pack, and ship orders.

ShipBob’s inventory control system lets you set up reorder points to ensure you reorder in time, putting real-time demand and replenishment parameters into place. As an end-to-end fulfillment provider, ShipBob handles every step of the ecommerce fulfillment process.

Request a quote from ShipBob

Inventory control is no easy task. Too much inventory and you lack funds to invest in other areas of the business or risk dead stock; Too little inventory and you lose potential sales, cause massive delays, and customer satisfaction levels plummet.

Inventory control requires input and output from operations that lines up with demand, promotions, and finances. You can bring in tons of sales, but without inventory control, your business’s profitability will take a hit and likely be unsustainable. To be more efficient, you need to invest in the processes and tools that improve inventory control.