What Is Inventory Control?

What Is Inventory Control?

By Team TranZact | Published on Feb 28, 2023

Inventory control, its importance, types, and other necessary information is crucial in automating businesses. If you are the owner of a business, you would definitely have faced the challenge of controlling a large inventory. Most entrepreneurs and store managers are always looking for technologies that can help them control inventory.

Let's understand what is an inventory control system, how it works, the benefits of incorporating inventory control software in your business, and all the other essential information to smartly manage your business hurdles.

What Is Inventory Control?

Inventory control is the process of monitoring and tracing products throughout the supply chain of a business. It includes all minute-to-major processes such as buying, warehousing, dispatching, and usage. The purpose of inventory control is to monitor the whole system and extract the actual data about stocks from the time you have added them to your listing to deliver it to the end users. This is the best technology that automates your inventory and supply chain without manual tracking.

The inventory control system is also beneficial for forecasting business patterns, keeping buying records, product locations, details, orders, and more factors. A well-engineered inventory control system automates many manual processes and gives you a real-time analysis of products, whether it is available in your warehouse. And if it is available in the stock, then what is the number of products, and where it is located in your warehouse?

Often inventory control is also termed stock control. The main goal of the inventory control system is to maximize profit, manage stock levels, minimize human error, and satisfy customer needs.

Inventory Control vs Inventory Management

The inventory control system is the segment of inventory management that deals with the stock control techniques and stock control methods within the warehouse. Inventory control deals with receiving, storing, and logistics of the product to its final destination, which is the customer. In addition, inventory controls include receiving orders, their fulfilment, and returns.

Different methods of inventory control help you manage the movement and tracing of the product. Using this system, store managers can get an exact idea about the status and condition of the product. This is the best system to know the daily trend of the existing stock in the warehouse. The inventory control system gives you clear visibility of your inventory even if you have multiple warehouses.

Inventory management is a process that helps business owners perform the purchasing and allocation of their business inventory. It tells you when you are required to purchase and which items to purchase for inventory. It helps store managers to know which products are in surplus and which are in shortage. Inventory management provides you with the exact trend of your inventory turnover. It also saves the cost evolved in maintaining too much stock and optimizes working capital.

Below is an overview of the comparison as well.

AspectInventory ControlInventory Management
DefinitionManages day-to-day stock and warehouse activities.Encompasses the entire process of forecasting and managing stock.
Key ActivitiesTracks condition and status of stock.Plans stock replenishments.
FocusCurrent status and location of stock.Future demand and stock needs.
Tools UsedBarcode or RFID for tracing.Demand forecasting tools.
GoalEnsure stock accuracy and availability.Prevent stockouts and overstocks.
ScopeMore operational, dealing with present stock.Strategic, looking at future stock needs.
Inventory TrackingEmphasizes the condition of current stock.Emphasizes predicting future stock levels.

Importance of Inventory Control

After knowing what is an inventory control system, it's time to know the importance and functions of inventory control in your business. Whether you are running a business online or offline, the implementation of an inventory control method is vital. If you have large sell volumes or a large product listing, then having a state-of-art inventory control system is essential for your business that will play a crucial role in automating your inventory control process. Though there are several factors when it comes to highlighting the importance of inventory control systems, we have shared some top benefits of why you should choose the right inventory control system for your business.

1. Control the quality of the product

An inventory control system helps you to maintain the quality of the product by showing you the necessary details. Advantages of inventory control also include that it provides you the information about the condition and quality of the goods and what all products are most loved by the customer. This helps businesses to maintain high standards for their product, along with knowing about the most demanded products when it comes to refilling the inventory.

2. To optimize your shipping

An inventory control system helps you smoothly track and optimize your logistic plans according to the product variety. Generally, shipping chains are very complex, and it is very hard to track the products especially when they are in transit. Inventory control optimization gives you the flexibility to trace the product, and if there are any changes required, you can do it without delays. Also, it provides you time to work on your business improvements.

3. Reduce operational cost

An inventory control system automates many processes, so it cuts the operational cost of your business. Business owners who have used the inventory control system felt that it has reduced labor costs and also brought transparency and accuracy to accounting. Further, an inventory control system helps business owners to audit the organization and helps you to know about the status of profitability.

4. Eliminates human error

As an inventory control system automates many processes so, automatically it frees you from excess financial burden and cuts the manpower evolved in the process. It also eliminates the chances of human error, as most inventory processes are managed by inventory control system software.

Challenges in Inventory Control

Let's go through the below section to know the challenges of inventory control systems faced by most business owners so that you can plan to handle such unforeseen situations.

Barcode error

An advanced inventory control system integrates barcodes and Radio-Frequency Identification (RFID) into the product to trace the product effectively. If these systems are not set with proper knowledge, it may lead to tracking and detection errors at the time of scanning. In this case, business organizations don't have an idea of how to deal with this type of problem, and that's why, they are not able to record the stock in the system properly. Business owners must make the right choice of barcode software for inventory control purposes.

Improper tracking

Improper tracking of inventory is one of the major challenges in an inventory control system, and it can affect your inventory as well as your growth. If you are using these inventory systems, then you must think about the backup and how you can avoid improper tracking challenges.

Incomplete details of goods

Sometimes the goods in your warehouse are damaged by weather elements or harmed by pests, but your inventory control system may not be capable of indicating that your stock is harmed and will not inform you that it is not in the condition for selling. These improper details about goods can affect your business reputation.

Prone to theft

The last challenge of the inventory control system is that it is prone to theft. It does not give you the assurance that the product in your warehouse is safe from any kind of theft and fraudulent activities. It is important for the companies who are using this system to execute a strict roadmap to prevent their product from any kind of fraudulent activities.

Inventory Control Systems

If you choose inventory control techniques that suit your business according to its scale, then you can reap all its benefits. Choosing the right inventory management and control methods can help your business grow and expand. Moreover, it can streamline complex operations and reduce the risks of error in stock intake.

Here's an overview of different inventory control systems that you should know about -

1. Periodic Inventory Control System

In this type of inventory control system, inventory managers and staff count the stock manually at regular intervals, which can be on a weekly or monthly basis. This can help the sales team in getting an idea about how much stock they have and accordingly promise to customers. It best suits smaller inventories and can be done simply without any specialized technology or tool.

2. Perpetual Inventory Control System

In contrast to where counting is done manually and without any specialized equipment once a month in periodic inventory control, in perpetual inventory control, counting is done regularly and with the use of specialized tools and equipment such as RFID tags and barcodes. This type of inventory control system is best for managing large-scale inventories as it helps in avoiding the bulk of uncounted stock and can give analyzed data for making sales decisions.

3. Spread-To-Control Inventory System

Using spreadsheets in an inventory control system may work for small businesses that don't need to monitor stock regularly and don't have different categories of products. Managing spreadsheets for inventory is tedious and manual control is highly prone to mistakes and may require labor-intensive effort.

4. Just-In-Time Inventory Control System

When the company orders goods only when they are needed, this system is known as a just-in-time inventory control system. This minimizes the stock hold of companies and also speeds up the delivery. It syncs all the parties in the supply chain and inventories at all the distribution points and delivers the orders as soon as the customer places the order.

Examples of Inventory Control in Practice

Let's understand inventory control based on the objectives of inventory control with the following examples:

  • Store inventory control can be an example that includes ensuring that all the products in physical and e-commerce stores are in good condition and are available at the required amount. Your inventory management software should sync across channels to inform you if any product has low stock or the expiry date is near. In physical stores, the system easily tells the staff whether the product is available in other outlets.
  • During the audit, you find that the computer system says that there should be 1000 watches in stock, but there are only 900, which creates a question about the missing items. Where are the remaining 100 watches? Are they stolen or lost? Did the supplier send you the wrong amount? Therefore, this gives you a chance to update the data of watches with 900 instead so that customers don't order the product which is not available.
  • While reviewing the stock, your inventory manager notices that a particular food item has there on the shelf for a long time and its expiration date is near; when this is flagged up, the company decides to sell it at a discount or give it free with a fast-selling product.

Inventory Control Techniques

If you're wondering how to control inventory, there are various techniques of inventory control systems through which you can control the movement of your goods in your warehouse. ABC Analysis, LIFO, Min-Max inventory control, and batch tracking are some of the techniques of inventory control that you can use for controlling the goods of your business. Let's understand these inventory control techniques with examples.

ABC Analysis

ABC analysis in inventory control is when the stocks are categorized in A, B, and C based on price, quantity, and sales. For instance, the product will be categorized in class A if the product's price is high, quality is good, and sales are fantastic. The business owner can cut the cost of low-sales products and minimize the product return by maintaining quality standards and understanding the customer needs.


LIFO stands for Last-In, First-Out, and FIFO stands for First-In, First-Out. Using the LIFO technique, the business owner gets an overview of which products enter the warehouse last and reach the customer first, while FIFO gives them an overview of which products arrive first in the warehouse and reach the customer first. LIFO helps store managers deliver the latest batch of products to the customer and FIFO helps in the processing and logistics of older goods. This is the best way to clear stocks from the warehouse and keep the inventory levels fresh.

Min-Max Inventory Control

Min- Max Inventory control technique is very helpful for smartly managing inventory. This system sets a minimum value and maximum value for purchasing orders. Min-max inventory control helps know which product is going towards the end and which products are available in the warehouse in surplus amounts.

Batch Tracking

Batch Tracking is the best technique that helps businesses track each move of the products from inventory. Using this technique, store managers get all information about the status of the product, like from where and when the product arrived and what is the final destination to deliver it. Batch tracing also provides detailed information about the product and its specifications for tracking purposes when it comes to larger lots.

Inventory Control Best Practices

A proper inventory control system can boost your business, make it more efficient, reduce the chances of dead stock, and expand your business. Further, incorporating some best practices with the right inventory control system can refine your business and can give you an edge over others. Therefore, here are some best practices for inventory control -

1. Better Supplier Relationship

A good relationship with suppliers can speed up your supply chain if you have effective coordination with suppliers. Besides, if there is a problem in the supply chain, you can work together to get it resolved. Other than this, having good relations with suppliers can help you in returning the products if the order is cancelled, negotiating minimum order quantity, and quickly restocking when demand is high.

2. Regular Auditing

Regular auditing is important in stock control and stock reconciliation as it ensures that your stock is in proper condition and is according to data. Auditing can be done using three ways: physical goods, spot checking, and cycle counting. A business must perform the counting of a physical inventory at least annually and at the end of the financial year so that it is aligned with income tax reports. Spot checking is when you select one or two products check them physically and match them with what is in the documentation.

3. Selective Inventory Control

Selective inventory control includes many methods of inventory control or management, for example, ABC analysis. In this technique, the business segregates products among the following usage: procurement difficulty, procurement source, usage value, unit price, rate of consumption, and seasonality. You can choose a method based on how much it affects the stock and on relative importance.

4. Prepare a Risk Management Plan

Challenges such as shortage of space at warehouses, cash shortfall, and unexpected sale spikes may occur anytime. Therefore, a risk management plan is important for inventory control so that you can avoid these risks when they occur.

5. Automate Reports of Inventory Control

Inventory control management systems produce large amounts of data and businesses need to analyze this data for reports. Some systems create automated reports for inventory control, such as historical stock, reconciliation, ageing inventory, and inventory financials.

6. Set Inventory Targets

Setting targets for inventory can make your inventory management and stock level efficient. It involves the minimum and maximum amount of inventory that you need to have at any given time to meet customers' demands.

7. Manage Purchasing Procedure

This can be done by using data for forecasting and controlling the purchase procedures of businesses. It also consists of identifying customer demand, adjusting safety stock, reordering points, and removing dead stock in inventory management.

8. Use Batch Tracking

Batches refer to a particular set of goods, and tracking it along the supply chain can ensure its safety and fast delivery of the goods. Businesses can use automated batch tracking to keep up with all the information of the batch and allow easy access to it whenever needed.

9. Reduce Inventory

An inventory reduction plan optimizes your inventory control mechanisms. The idea is to find a balance point in your inventory in such a manner that your inventory does not hold excess stock or fall short of items. This can be done by sharing sale details with your supplier, modifying your stock, or offering a discount. Other than this, you can use large-volume inventory control tools, real-time tracking, and integrated communication.

10. Streamline Stock Intake

Streamlining stock control can reduce the chances of mistakes by staff. It includes all the steps to keep your staff engaged and focused on work. This can be done by following steps such as scheduling your stock intakes to enhance the impact on business operations, understanding what stock you are counting and how you are counting, relying on data and avoiding guesswork, and organizing and cleaning the stockroom before stock intake.

11. Use Cloud-Based Inventory Management System

Instead of using a traditional inventory control system, using a cloud-based inventory system provides you with seamless upgrades and features that can make your inventory control techniques efficient and seamless. Besides, the best software for inventory management helps to ensure that all your stock activities are functioning smoothly.

Don't Miss Out on the Right Inventory Control System for Your Business

The inventory control system is a much-needed technology for businesses that helps them keep track of stocks. It is an effective and transparent system that has replaced manual accounting through which store managers can manage inventory with ease. Based on the type of inventory control systems, it clears the visibility of inventory and provides an exact overview of the purchase and sales of the company. If you are running a business that has diverse inventory categories, then don't delay in adopting the best system designed to control inventory. TranZact enables you to increase inventory efficiency, ensure auto stock valuation and analyze inventory in real time.

FAQs on Inventory Control

1. What is an inventory control system?

An inventory control system is a technology solution used for tracking and managing the goods of businesses from the start to the end of the supply chain.

2. What are the five inventory types?

The five types of inventory control are

  • Raw Materials
  • Finished Goods
  • Work in Progress
  • Packing Materials
  • Maintenance, repair, and Operation

3. Which is the best inventory management system?

There are various inventory management systems, such as periodic inventory management, which suits small-scale inventories, and perpetual inventory management, which is best for large-scale inventories. However, this depends on the specific inventory needs of the business.

One of the best software for inventory management is TranZact which makes inventory management easy, efficient, and cost-effective by providing real-time inventory insights and reports.

5. Why is Inventory Control important for businesses?

Inventory control is crucial for businesses as it helps in monitoring and tracing products throughout the supply chain. It automates the inventory and supply chain processes, eliminating the need for manual tracking. A well-implemented inventory control system can forecast business patterns, maintain buying records, track product locations, and provide real-time analysis of product availability in the warehouse. It aims to maximize profit, manage stock levels, reduce human errors, and meet customer demands.

6. What challenges might businesses face with Inventory Control systems?

Businesses may encounter several challenges with inventory control systems, including:

  • Barcode errors: Improper setup of barcodes and RFID can lead to tracking and detection issues during scanning.
  • Improper tracking: Inaccurate tracking can impact inventory and business growth.
  • Incomplete details of goods: The system might not indicate if stock is damaged or not in a sellable condition.
  • Prone to theft: Inventory control systems do not guarantee protection against theft or fraudulent activities.

7. What are some best practices for effective Inventory Control?

To ensure effective inventory control, businesses should:

  • Maintain a good relationship with suppliers to streamline the supply chain.
  • Conduct regular audits to ensure stock accuracy and condition.
  • Implement selective inventory control techniques like ABC analysis.
  • Prepare a risk management plan to address potential challenges.
  • Automate inventory reports for better data analysis.
  • Set inventory targets to maintain efficient stock levels.
  • Manage purchasing procedures using data forecasting.
  • Use batch tracking for detailed product movement information.
  • Reduce excess inventory through various strategies.
  • Streamline stock intake processes to reduce errors.
  • Adopt cloud-based inventory management systems for seamless upgrades and features.

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TranZact is a team of IIT & IIM graduates who have developed a GST compliant, cloud-based, inventory management software for SME manufacturers. It digitizes your entire business operations, right from customer inquiry to dispatch. This also streamlines your Inventory, Purchase, Sales & Quotation management processes in a hassle-free user-friendly manner. The software is free to signup and gets implemented within a week.