What is Inventory Control – Meaning, Importance & Techniques

Inventory control means keeping track of stock levels and managing how much of each product a business holds. It helps a company know what it has, what it needs, and when to order more.

Let’s say a small toy shop sells board games. If it doesn't track how many games are left, it might run out just before a holiday rush or end up with too many that go unsold. With inventory control, the shop checks stock regularly, knows what sells fast, and restocks just in time.

Here’s a simple example:
 

This process avoids overstocking and understocking. It also helps prevent loss due to theft or damage. With the right stock at the right time, businesses improve customer satisfaction and increase profits.

Why Inventory Control Matters in Business?

Inventory control means keeping the right amount of stock, not too much and not too little. It’s important because stock takes up a big part of a company’s money. If you check a product-based company’s balance sheet, you’ll often see inventory listed as one of the largest current assets.

Good inventory control helps in two ways:
 

• It stops money from being stuck in extra stock.
   
• It ensures you never run out of what you need.
   

Even companies that use just-in-time (JIT) ordering systems still need some form of inventory control to keep operations smooth.

How Inventory Control Affects Business Performance
 

Example:

A mobile shop holds ₹10,00,000 in inventory but only sells ₹6,00,000 worth in a month. ₹4,00,000 is stuck in unused stock. With inventory control, they cut stock to ₹7,00,000, free ₹3,00,000 for marketing or expansion, and still meet customer demand.

Using inventory control wisely helps any business lower costs, avoid waste, improve cash flow, and increase profits, all while keeping customers happy.

4 Easy Ways to Control Inventory

Controlling your stock helps you know what you have, what you need, and what you are selling. Below are four easy ways to track and manage your inventory, from the most basic to more advanced methods.

Extra Method for Bigger Businesses

Advanced Software

What It Is: A strong computer system that connects with other business tools
How It Works: It links with your sales system and shows detailed reports. It helps in planning and works well as your business grows.
Best For: Medium and large businesses that need better systems.

No matter which method you choose, the most important thing is to keep your stock records correct and updated. A good system helps your business run smoothly and avoid mistakes.

How Shops Keep Track of Stock

Every shop needs to know how many items it has, what is sold, and what needs to be bought again. Here is a simple table that shows five easy ways to track stock.

Ways to Control Inventory
 

Every shop or business can pick the method that suits its size, budget and needs. Small shops may use QR codes or do manual counts. Bigger shops may use barcodes or RFID tags. The best system helps you stay organised and avoid running out of stock.

What Are Inventory Control Methods?

Inventory control methods are ways that businesses decide how much stock to keep, how much to order, when to sell, and how much to store. These methods use the company’s skills, planning tools, and customer needs to help make the right choices.

Good inventory control helps a business:
 

• Save money by not buying or keeping too much stock
   
• Make sure products are always ready when customers want them
   
• Use warehouse space wisely
   
• Avoid waste or items going out of date
   

Why Inventory Control Matters?

When a company holds too much stock for too long, it uses up money and space. To measure this, businesses use something called Days of Inventory Outstanding (DIO). DIO shows how many days, on average, a business keeps stock before it sells it.

A lower DIO is better, because it means:
 

• The stock moves quickly
   
• The business is not wasting money on storage
   
• There is less risk of damage or loss
   

In recent years, DIO numbers have gone up, which means businesses are keeping stock longer. This can increase warehouse costs and reduce profits. That is why strong inventory control is important. It helps businesses sell items faster and avoid extra costs.

Conclusion

Inventory control helps a business keep the right amount of stock at the right time. It saves money, avoids waste, and keeps customers happy. By planning and checking stock properly, a business can run smoothly and grow with fewer problems.

FAQ’s
 

1. Can inventory control affect business profits?
Yes. Good inventory control reduces extra spending, avoids overstocking, and helps sell items faster, which directly increases profits.

2. Does inventory control help during busy seasons?
Absolutely. It helps businesses prepare in advance, so they never run out of stock when customer demand is high.

3. How does poor inventory control cause problems?
Poor control leads to wasted money, lost sales, and unhappy customers because items are either missing or sitting unused.

4. Can inventory control help with planning the future?
Yes. It shows buying and selling trends, which helps businesses make smarter choices for future stock and sales.

5. Do all businesses need inventory control?
Yes. Whether large or small, every business benefits from knowing what they have and what it needs to order next.

Apply for Loans Fast and Hassle-Free

Apply Now

About the Author

LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.