written by | April 20, 2022

Everything You Need to Understand About Inventory Control

All business enterprises need to maintain a particular volume of stock to meet the demands of their customers. These stocks are also known as inventory. Businesses have to monitor that the stocks that manufacturers sent them are of the exact quantity as per the order and nothing is damaged. Understanding how much inventory to maintain and which stocks to repurchase is the more significant challenge. It enables organisations to understand the prevailing status of slow-moving assets. Purchasing and maintaining inventory forms part of a major investment of the capital. If some stocks experience a slow sales rate, the business can either dispose of them at discounted rates or return them.

Inventory control is about understanding the finer details of meeting the demands of clients and being able to deliver the products on time. This reaffirms the clients' trust and adds to the profit margins. Supply chain management is a vital aspect of inventory control as it helps to efficiently manage the entire flow of all the raw materials, products, and services right up to the point of sale. This activity includes details of all the products, integration of the product code, the levels of reordering, lists of all the stocks, individual totals, and the various processes for storage and sales.

Did you know?

That 'tally sticks' were a memory aid device that helped record and document stock quantities, numbers, and messages almost 50,000 years ago.

What is the Meaning of Inventory Control?

Inventory control and stock control are two sides of the same coin. Inventory control involves the management of the levels of stocks kept in an organisation's warehouse. This stock-monitoring or supply-chain process starts from ordering the goods to their arrival at the warehouse, including storage and sale. The inventory of a business reflects on its balance sheet as one of the principal current assets. Thus, you need to manage them effectively to minimise losses for the organisation, or it can have a negative impact.

Also Read: What is Inventory Management Software System?

Why do Businesses Carry an Inventory?

All businesses consider carrying inventories to ensure the smooth functioning of the company. Some of the key reasons for having an inventory are as follows:

  • Guarantees flawless production of the final stocks
  • If some crucial parts are found missing or unavailable in the middle of a production line, it can upset the entire cycle of production. This will negatively impact the sales and delivery of the orders.
  • Faster customer service
  • When orders are placed for some distinct stocks by various customers, and the storage inventory displays their availability, the goods can dispatch quickly. This makes clients appreciate your services and increases your business's goodwill.
  •  It can boost your business sales, attract new customers, and considerably increase your profit margins.
  • To meet urgent requirements during contingencies.
  • Most businesses face some issues, especially when it comes to lead time. Lead time is the time that lapses between placing the order for products and receiving the products. Due to various reasons, the time between these two activities can be very long. 
  • If you have ample inventory in your storage premises or warehouse, you can meet all urgent requirements and make timely deliveries. This protects you from losing your dedicated customers and not disappointing new customers.
  • Helps in efficient use of the machinery as well as staff employed.

Businesses that carry an inventory to meet all types of spontaneous demands for stocks can provide consistent delivery of their products. This also means that their machines function adequately, and their labour force is occupied with work. This reduces the chances of machinery getting under-utilised, which could lead to breakages and breakdowns in the future, leading to unnecessary expenses.

Every business strives to procure goods at affordable rates. This necessitates buying large volumes of inventory. This is time-effective for manufacturers and cost-effective for businesses.

The supply chain process and other operations become economically viable. Large volumes of stocks will ensure economic operations as the orders do not have to be placed at regular intervals. This helps the business to save operational costs.

Importance of Inventory Control

Inventory control is an indispensable tool for every business for multiple reasons. When a business is dealing in a large volume of stocks, it has to ensure that the goods are stored inefficiently, and there is a consistent availability at all times. Most businesses employ enterprise resource planning to ensure that they do not face the wrath of clients and suffer losses. The key reasons for its importance are as follows:

  • It helps to lower costs.
  • It enables your business to fulfil timely deliveries.
  • Protects theft of stocks
  • Protects your stocks from getting spoiled
  • It helps you to return unsold goods in their original state.
  • It gives you an insight into the purchasing patterns of customers and their preferences for goods.
  • It creates more opportunities for your business.
  • Inventory control helps you understand emerging as well as futuristic trends in your field. This helps you adopt new strategies to meet those challenges with success.
  • Objectives of inventory control
  • It enables a business to control its overall costs.
  • When you maintain a good amount of inventory, it helps you control the costs which you would otherwise incur in placing orders at regular intervals.
  • Protects businesses from duplication of stock orders.
  • Ensure the availability of materials. This prevents your production from coming to a standstill.
  • Ensures improved customer service – availability of stocks helps a business cater to sudden or increased demand for various goods. The timely fulfilment of such deliveries enhances sales and profits and helps improve the brand image.
  • Inventory control helps in reducing spillage. There is a proper storage place for every stock, and misuse of any inventory is easily detected. An appropriate control system with proper documentation protects your inventory from being stolen or wasted.
  • In order for the production process to run smoothly and products to dispatch on time, it helps to maintain ample stocks. This way, the production process runs smoothly, and the final products are ready for dispatch as per schedule.
  • A well-stocked warehouse ensures that your manufacturing department never faces a shortage of the required materials.
  • A business can obtain incentives and enjoy discounts on purchasing a large volume of inventory.
  • It helps a business understand stocks that are moving at a slow pace. The business can then either return them or try to sell them at a discounted rate.

Advantages of Inventory Control

  • Enables businesses to reduce costs
  • Businesses can maintain optimal levels of products
  • It helps to streamline the entire process of procuring the stocks
  • Inspects inventory at regular intervals, possible
  • A systematic record of the movement of all the materials is maintained.
  • Protects businesses from facing stock shortages
  • It helps businesses to verify the stocks in storage physically
  • Allows enterprises to meet sudden and increased demand for products
  • Businesses can benefit from attractive discounts on bulk purchases of goods
  • Efficient utilisation of machinery and labour
  • Facilitates generation of reports in real-time

Also Read: A Guide on How to Maintain Accounts With or Without Inventory in Tally ERP 9

Steps Involved in Inventory Control

  • The warehouse or storage premises selected by you receive the deliveries.
  • There is a complete inspection of all the delivered products, and these are then sorted out and stored.
  • Workers should consistently monitor inventory levels.
  • Dispatch orders according to the client's requests.
  • The orders, once approved, are collected and sent for dispatch.
  • The levels of inventory are then updated. The change in the stock levels suggests that you have to refill the goods sold.


This article indicates how crucial inventory control is to a business. It helps introduce the efficiency of equipment and labour at all times. The most significant advantage is that you can fulfil the requirements of your clients and make timely deliveries. This helps boost the brand image and the commitment levels of the brand. Implementing a proper inventory control system helps businesses suffer fewer losses and wastage of stocks.
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Q: What are the advantages of inventory control?


  • Access to reports of inventory levels in real-time
  • All logistics are well documented
  • Regular updating of all inventory levels
  • Reduces unnecessary costs by maintaining balanced inventories

Q: What are some of the benefits of inventory management?


Some of the benefits of inventory management include:

  • An organised storage premises
  • Enhanced productivity
  • Efficient usage of labour and machinery
  • Reduced losses
  • Increased profit margins
  • Accurate placement of orders
  • Increased clientele due to timely deliveries

Q: What is the inventory control process?


The process involves placing orders (made by customers), receiving the goods, ensuring proper storage, recording the same, and finally dispatching them.

Q: What is the importance of inventory control in a business?


An inventory control system helps businesses meet clients' demands promptly. Maintaining very low levels of stocks can result in disgruntled clientele and loss of business. Inventory control helps maintain the right levels of supplies and reduces loss and wastage.

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