Inventory Control: Essential Systems, Methods & Tips
by EasyPost
Understanding inventory control is crucial for running an organized, efficient warehouse and fulfilling orders on time. With effective inventory control, you’ll have full visibility into the stock you have on hand, preventing stockouts and overstocking.
Let’s talk about what inventory control is, how strategies vary by business, and how you can implement the right methods and techniques for your organization.
What is inventory control?
Inventory control, or stock control, is the process of regulating inventory levels to prevent shortages (stockouts) and excess inventory (overstocking). It focuses on tracking what’s on hand, where it’s stored, and how quickly it moves.
The inventory control process begins when goods enter your logistics facilities and ends when they’re sent to customers or disposed of.
Good inventory control requires lots of data; you’ll need to collect and analyze information on stock purchases and reorders, inventory turnover, shipping, storage, and more. With full visibility into the state of your inventory, you’ll be able to reduce waste, cut carrying costs, and keep operations running smoothly.
Main objective of inventory control
The main objective of inventory control is to strike a balance between having enough stock to meet customer demand while keeping excess inventory—and its associated costs—to a minimum.
In other words, it’s all about maximizing profits while minimizing your investment in inventory. Both stockouts and overstocking are major roadblocks to achieving this objective.
- Stockouts. Stockouts, or running out of high-demand products, lead to dissatisfied customers and decreased brand loyalty.
- Overstocking. Overstocking, or having too many products on hand, leads to unnecessary holding costs, product obsolescence, and tied-up capital.
The bottom line? Good inventory control helps businesses maximize profits by reducing waste, improving cash flow, and giving customers access to the right products at the right times.
Inventory control vs. inventory management
Inventory control and inventory management are similar, but they have slightly different meanings.
Inventory management is a broader term, covering everything from sourcing and purchasing to forecasting and demand planning. When you’re deciding when to reorder products, and in what quantities to purchase them, that’s inventory management.
Inventory control fits under the umbrella of inventory management, but it only deals with the goods that are currently in your warehouses. With inventory control, you specifically focus on maintaining accurate stock counts and efficient storage.
Why is inventory control important?
Inventory is expensive, and it’s even more costly when you purchase items that don’t sell or run out of popular products. Inventory control helps solve both issues, revealing opportunities to optimize processes by reducing or increasing inventory levels.
The benefits of effective inventory control include the following:
- Cost savings. Keeping only the necessary amount of inventory minimizes storage fees, insurance, and depreciation costs. It also means fewer resources spent on handling and maintenance.
- Improved cash flow. By not overinvesting in excess inventory, businesses free up capital for other expenses like marketing, expansion, or new product development. Faster inventory turnover also means quicker revenue generation.
- Customer satisfaction. Inventory control helps you meet customer expectations, ensuring you don’t lose out on sales (and lose loyalty) when products aren’t in stock. Another customer-centric benefit? Inventory control allows you to know exactly what’s in stock, reducing errors in order fulfillment.
- Quality control. With proper inventory control, you can make sure that only high-quality, sellable products make it to customers. Reducing excess stock lowers the chances of damaged, expired, or defective items sitting in storage for too long (and potentially being sold). Similarly, regular stock checks make it easier to catch quality issues early.
- Reduced waste. With better stock tracking, businesses can avoid holding perishable products for too long. Good inventory control also reduces losses due to theft, damage, or misplacement.
Inventory control methods
While some businesses handle inventory control manually, others turn to advanced software to help manage the process. Which method is right for your business? We’ll explore some pros and cons of each one.
Paper and pen
The most basic method, this involves recording stock levels, purchases, and sales in a notebook or ledger. It’s simple and low-cost, making it ideal for very small businesses with minimal inventory. However, this manual method is prone to human error, difficult to scale, and lacks real-time tracking.
Spreadsheets
Digital spreadsheets offer a more organized and automated way to track inventory. Using spreadsheets, businesses can create formulas to calculate stock levels, reorder points, and sales trends, making inventory control more efficient.
Spreadsheets are low-cost and customizable, making them a popular choice for small to mid-sized businesses.
They do have a few downsides, though: They require manual updates, can become complex over time, and don’t provide real-time tracking or automation like dedicated inventory software.
Inventory software
Inventory control software automates stock tracking, provides real-time updates, and integrates with sales and accounting systems to quickly transfer data. Whereas manual inventory control methods are prone to human error, software significantly reduces the chances of mistakes.
These systems can range from simple to complex, making them great for both low- and high-volume businesses. Just make sure to choose software that meets your needs, keeps up with your order volume, and fits well into your overall supply chain strategy.
Training your employees to use the software will help improve efficiency and ensure your investment is worthwhile.
Types of inventory control systems: periodic vs. perpetual
Whether you track inventory using pen and paper, spreadsheets, or dedicated inventory software, it’s necessary to perform physical inventory counts. The frequency of these counts depends on whether you use a periodic or perpetual inventory control system.
The more manual periodic system will require frequent counts, while a perpetual system that relies on automation will require less frequent counts.
Periodic inventory control system
A periodic inventory control system is a method of tracking inventory where stock levels are only updated at set intervals, such as weekly, monthly, or quarterly, rather than in real time.
If you use this system, you’ll count your inventory manually or with a batch update process and compare the results against sales records to determine how much stock has been used or sold.
Because it doesn’t require constant tracking, a periodic system is simpler and more cost-effective than a real-time system. However, it also means you don’t have immediate visibility into stock levels; this can lead to discrepancies, stockouts, or over-ordering. And the more stock you have on hand, the more time-consuming and complex the system gets.
A periodic inventory system is best for businesses that:
- Have a relatively small or low-value inventory that doesn’t require constant monitoring
- Experience infrequent or predictable sales
- Want to avoid the cost and complexity of inventory software or automated tracking
- Can afford occasional stock discrepancies without major disruptions
- Rely on manual tracking methods or simple tools like spreadsheets
Perpetual inventory control system
In contrast to a periodic system, a perpetual inventory control system continuously updates stock levels in real time as sales, purchases, and inventory movements occur.
This system relies on technology like barcodes, RFID scanners, and inventory management software to automatically track changes, giving you an up-to-date view of your inventory at any given time.
The biggest advantage of a perpetual system is accuracy—it minimizes stock discrepancies, reduces the risk of stockouts or overstocking, and streamlines order fulfillment. It also provides valuable insights into inventory trends, helping you make data-driven decisions.
Keep in mind that even with a perpetual system, you’ll need to conduct occasional physical inventory counts. This allows you to double-check the system’s accuracy, discovering any mistakes that may have slipped through the cracks (such as scanning errors). For example, the system may not properly account for product damage or loss, and a physical count will reveal that.
A perpetual inventory system is best for businesses that:
- Handle large volumes of inventory or fast-moving products
- Need real-time stock visibility to prevent stockouts and overstocking
- Use barcode scanning, RFID, or automated inventory software
- Operate in industries where accuracy and efficiency are critical
- Want to integrate inventory tracking with sales, accounting, and supply chain management systems
Inventory control techniques
Effective inventory control isn’t just about knowing what’s in stock—it’s about using the right strategies to keep operations running smoothly. Different businesses require different approaches, but certain techniques can help optimize inventory levels, improve accuracy, and reduce carrying costs.
Below, we’ll break down key inventory control techniques, how they work, and what they can do for your business.
FIFO and LIFO
First in, first out (FIFO) and last in, first out (LIFO) are two ways to manage inventory flow. With FIFO, the oldest stock is sold or used first, which is ideal for perishable goods or trendy products that might go out of style quickly. LIFO, on the other hand, moves the newest inventory first. This can be useful in industries where prices fluctuate, because it can reduce taxable income in times of inflation.
For most businesses, FIFO is the go-to method since it prevents outdated or obsolete stock from piling up. However, if you're dealing with non-perishable goods and looking for tax advantages, LIFO might be worth discussing.
Whichever method you use, the key is consistency—switching between FIFO and LIFO can cause accounting headaches and inventory confusion.
Just-in-time (JIT)
Just-in-time (JIT) logistics is all about keeping inventory levels as lean as possible by ordering stock only when it’s needed. This minimizes storage costs, prevents overstocking, and reduces the risk of dead stock. It’s a great approach if you have reliable suppliers and predictable demand, but it can backfire if you face unexpected delays or demand spikes.
If you're considering JIT, strong supplier relationships are critical. Make sure you have backup suppliers and a solid demand forecasting system in place. Otherwise, one unexpected supply chain issue could leave you scrambling to fulfill orders.
ABC analysis
ABC analysis helps businesses prioritize inventory by classifying products into three categories: A (high-value, high-priority), B (moderate value), and C (low-cost, high-volume).
This ensures that the most critical items—those that make the most money for your business—get the most attention while still keeping an eye on lower-priority stock.
Using ABC analysis, you can focus your resources on the inventory that has the biggest impact on your business. If you’re dealing with a large catalog, this technique helps prevent wasting time and effort on low-value items while ensuring key products are always available. Consider reviewing your ABC classifications regularly, especially if sales trends shift.
Safety stock and reorder points
Holding safety stock and setting reorder points prevent stockouts without overloading your storage space.
Safety stock acts as a buffer for unexpected demand spikes or supply chain delays, while reorder points trigger replenishment when inventory hits a specific threshold.
Striking the right balance is key. Too much safety stock ties up cash, while too little can lead to lost sales. Use historical sales data and lead time calculations to determine optimal levels.
And don’t just set it and forget it—adjust your reorder points as your business grows or demand changes.
Cycle counting
Cycle counting replaces full inventory counts with ongoing, smaller audits, making it easier to maintain accuracy without shutting down operations. Instead of checking everything at once, you count a portion of inventory on a rotating basis, allowing you to catch errors and discrepancies early.
Start by prioritizing high-value or fast-moving items, then gradually expand. If you’re struggling with inventory discrepancies, cycle counting can help pinpoint where issues are happening.
Vendor-managed inventory (VMI)
With vendor-managed inventory (VMI), suppliers take on the responsibility of restocking inventory based on your sales and stock levels. This reduces the burden on your team while keeping stock levels in check.
VMI is commonly used in retail and manufacturing but can also be a game-changer for ecommerce brands with strong supplier partnerships.
If you’re thinking about VMI, transparency is key—your suppliers need real-time data to keep stock levels optimized. This approach works best when you have trusted vendors and clear agreements in place to avoid misalignment on stock levels.
Batch tracking and lot control
Batch tracking assigns a unique identifier to groups of products, making it easier to trace inventory from production to sale. This is especially important for businesses that deal with expiration dates, quality control, or compliance regulations.
If you handle food, pharmaceuticals, or any regulated goods, batch tracking is non-negotiable.
Even if you’re in a different industry, it can still help with product recalls and customer service. Make sure your inventory system supports batch tracking so you can quickly trace products if needed.
Best practices for inventory control
While inventory control can get complex, businesses can keep things running smoothly by staying organized and using technology and partnerships to their advantage.
Conduct regular audits and reviews
Regular inventory audits help catch differences between recorded and actual stock levels before they become expensive issues. They also help you identify theft, miscounts, or outdated stock early, preventing financial losses and operational disruptions.
The following three types of inventory counts can be helpful for every business, regardless of how advanced your inventory management system is:
- Physical inventory. In a physical inventory check, you count everything. This should be performed at least once a year.
- Spot check. Spot checks, which are especially useful for fast-selling products, involve performing a physical count for one or two products at a time and comparing the results with your system’s data.
- Cycle count. With cycle counting, you spread counting out throughout the year. This method should prioritize high-value items.
Use technology for real-time tracking and automation
Manually tracking inventory can be a nightmare—it's slow, error-prone, and often outdated. Automating things makes sure everything’s updated instantly and correctly.
With the right software, you can monitor stock levels and track everything from anywhere. Look for inventory software that fits your business and integrates easily with your sales and accounting tools.
Additionally, technology like barcodes and RFID can significantly improve inventory control by reducing errors and increasing efficiency. These systems help businesses maintain accurate stock levels without the need for manual data entry.
- Barcodes represent data in a machine-readable format, allowing warehouse workers to quickly scan items at every stage of the supply chain. With quick information transfer, barcodes speed up inventory counts, make tracking more accurate, and reduce human error.
- RFID (radio frequency identification) technology uses radio waves to track inventory without direct line-of-sight scanning. Unlike barcodes, RFID can scan multiple items at once and provide instant visibility into stock movement, making this technology ideal for high-volume warehouses.
Organize your warehouse efficiently
A cluttered warehouse leads to slower orders, mistakes, and a lot of wasted time. By organizing your stock well, you can speed up fulfillment and make it easier to find what you need.
Start by grouping your most popular products near the packing area, labeling everything clearly, and using a system that makes sense (like FIFO for perishable items). You can also create clear aisles for easy movement, so things don’t get backed up.
Collaborate with suppliers
Working closely with your suppliers helps you stay stocked without getting buried in inventory. Sharing sales data and forecasts means your suppliers can help you stay ahead of demand and avoid delays. To build better relationships, make time for regular check-ins with your suppliers, set clear reorder points, and consider working with multiple suppliers so you're not dependent on just one.
Inventory control challenges you might encounter
While the right inventory control strategies can improve efficiency and reduce costs, businesses still face several challenges in keeping stock levels optimized.
From unpredictable demand shifts to lack of inventory visibility, these obstacles can disrupt operations and impact profitability.
Understanding these common challenges is the first step toward finding solutions that keep your inventory under control and your business running smoothly.
- Lack of visibility. Without real-time tracking, you’ll struggle to know what’s in stock, leading to stockouts, overordering, and inefficiencies. Implementing inventory management software, using barcode or RFID scanning, and conducting regular stock audits can improve visibility.
- Inaccurate data. Discrepancies between recorded and actual inventory levels can cause fulfillment issues, lost sales, or excess stock. Maintaining consistent inventory counts, integrating sales and inventory systems, and automating data entry can help ensure accuracy.
- Human error. Manual processes often lead to costly mistakes and inefficiencies. You can minimize errors by reducing reliance on manual tracking, providing employee training, and using automated systems.
- Seasonal fluctuations. Seasonal fluctuations can make inventory control unpredictable, leading to stockouts during peak season or excess inventory once the season ends. Effective inventory control techniques—like setting accurate reorder points and maintaining safety stock—will help you navigate these seasonal challenges.
What to look for in inventory control technology
Inventory control technology includes software and hardware solutions that help businesses track, manage, and optimize stock levels in real time. These systems can range from simple barcode scanners integrated with spreadsheets to advanced, AI-powered inventory management platforms.
Choosing the right solution is crucial because different businesses have different needs—what works for a small ecommerce brand probably won’t be enough for a large warehouse handling thousands of SKUs.
Some systems focus primarily on tracking inventory movement, while others offer forecasting, automation, and integrations with suppliers. The right technology should align with your operational size, product complexity, and growth goals.
Look for the following key features:
- Real-time inventory tracking
- Barcode or RFID support
- Integration with ecommerce and ERP platforms
- Automated reorder points and alerts
- Cycle counting support
- Batch and lot tracking
- User-friendly interface
Investing in the right inventory control technology can reduce manual errors, save time, and improve overall efficiency. Before making a decision, consider your business's current challenges and future needs to find a system that truly supports your operations.
Keep logistics running smoothly with EasyPost
Once you’ve mastered inventory control, you’re on your way to greater profitability and higher customer satisfaction. Your next objective? Optimize the most costly and time-consuming parts of your order fulfillment process: picking, packing, and shipping.
When it comes to shipping, you need a tool that streamlines carrier integrations, helps you find the best rates, and automatically generates compliant shipping labels. EasyPost Enterprise Shipping is designed to help high-volume, high-growth shippers do all of the above—and more.
Need to improve your cartonization, document generation, or data analytics? The EasyPost Enterprise suite of solutions offers tools for that too!