Inventory control systems may not be the sexiest topic. But trust us, they're the unsung heroes of any budding ecommerce business. Even with happy customers and a healthy profit margin, business success can quickly turn into a chaotic catastrophe without the right inventory management system in place to manage your stock movements.
Harmony is the secret to success, and choosing the right inventory control system is like finding your ecommerce soulmate. It should fit your business like a perfectly tailored suit. And whether you're a small boutique or a booming online empire, your inventory management software of choice should be flexible enough to grow with you.
Oh, and it should also integrate seamlessly with other tools and platforms like your online store and accounting software. So, all in all, a fair amount to consider!
In this comprehensive guide, we’ll do our best to make the topic of inventory control a little sexier to ensure the easiest read possible while we discuss all the key features in detail. We’ll cover:
What is an inventory control system?
What do inventory control systems do, and why do you need one?
Understanding inventory control systems: more than just stock keeping
Inventory control vs. inventory management: what's the difference?
Navigating your options: types of inventory control systems
Examples of inventory control techniques
6 reasons to invest in an integrated inventory control and inventory management system
Top tips and expert advice on choosing the right inventory control and inventory management software
How to speed up order fulfillment and achieve accurate inventory tracking with Linnworks
Frequently asked questions about inventory control systems
Ready to master the art of inventory control alchemy? Then let's dive right in.
What is an Inventory Control System?
An inventory control system is a software or technology-driven solution designed to efficiently manage and monitor a company's inventory levels. The primary goal of an inventory control system is to ensure the right products are available at the right time while minimizing costs and maximizing customer satisfaction.
What Do Inventory Control Systems Do and Why Do You Need One?
Inventory control systems allow businesses to track the quantity, location, and movement of their products and raw materials in real-time. By storing inventory records on a central database and automating processes like stock tracking, ordering, and replenishment for various types of inventory, businesses can streamline operations, reimagine stock control processes, optimize warehouse space across multiple locations, and improve overall supply chain management.
Understanding Inventory Control Systems: More Than Just Stock Keeping
Why is inventory control important? Simple. Because keeping track of raw materials and inventory items across multiple locations allows you to see what's in stock, what's running low, and when it's time to replenish. It's called stock control for a reason. So, it's time to take the reins!
But the inventory control process isn’t just about avoiding stock mishaps. Employing the proper inventory control techniques also helps you to better serve your customers, maximize profit, and streamline for efficiency. Here’s how.
Meeting customer demands
The right inventory management software acts like a personal financial advisor whispering in your ear, telling you which products are hot sellers and which are gathering dust on the shelves. Equipped with this knowledge, you can:
Optimize safety stock levels
Avoid excess stock
Transform operational logistics to meet customer demands with ease.
Making More Profit
The impact of more effective inventory management on your bottom line cannot be underestimated. The best inventory control systems effortlessly automate mundane tasks like:
Tracking raw materials
Pinpointing inventory quantities
Updating stock movements
Generating quality control reports
All of which makes the investment a no-brainer. After all, who wouldn't want to say adios to wasted money and hello to moolah-making business acumen?!
Streamlining Operational Efficiency
Why waste precious hours tracking inventory manually? Running a physical inventory count is not only mind-numbing. It's open to significant human error. Dedicated inventory management apps ensure tip-top inventory accuracy, leaving you with more time to brainstorm snazzy marketing campaigns and practice your victory dance. See, who said managing inventory couldn't be fun?
The overall result of better inventory management? No more physical inventory counts, embarrassing out-of-stock situations, or grumpy customers. You'll be a hero in the eyes of every stakeholder, and your business will run as smoothly as silky warm butter spread over tasty sourdough toast.
Inventory Control Vs Inventory Management: What's The Difference?
Although sometimes used interchangeably, there are some notable differences between the key features of inventory control and inventory management systems.
In the simplest terms, inventory control is a hands-on approach allowing you to keep a watchful eye on day-to-day inventory activities. In contrast, inventory management is a more all-encompassing strategic framework that guides your overall inventory decisions and aligns them with your overarching business goals. But, you're probably not here for the simplest version.
Inventory Control in a Nutshell
Inventory control revolves around the day-to-day operations and meticulous management of your warehouse inventory across multiple locations. It focuses on tracking inventory, inventory movement, and safety stock to prevent shortages or excesses. The goal is to ensure there is always enough - but never too much - inventory available when and where it is needed, based on customer demands.
Inventory Management in a Nutshell
Inventory management takes a broader perspective, involving strategic planning across your entire supply chain ecosystem - from the point of order from a supplier to the point of selling to a client. Inventory management looks beyond the immediate day-to-day considerations of existing inventory flow. It also encompasses forecasting, optimization, and long-term planning based on market trends and business goals.
Inventory Control + Inventory Management = ECommerce Success
To succeed in managing inventory levels effectively, you need to strike a balance between inventory control and inventory management. Think of them as two essential pieces of the same puzzle that fit together to create a complete, cohesive, and successful inventory management strategy.
By understanding their distinctions and harnessing the combined power of inventory control and inventory management systems, you'll set yourself up for sustainable growth and commercial success.
The primary takeaway here is that having an efficient inventory control and inventory management system is essential in ensuring you have the right amount of stock to meet customer demand while minimizing wider supply chain costs.
Navigating Your Options: Types of Inventory Control Systems
There are two main players in the inventory control methods game: periodic inventory systems and perpetual inventory systems. Both help you track inventory and remove the human error associated with physical inventory counts. However, each takes a unique approach to handling inventory management, catering to different needs and preferences.
We'll be upfront with you - perpetual inventory systems are usually better suited to ecommerce enterprises. But, ultimately, whether you choose a periodic system or perpetual system will depend on your business size, inventory complexity, and desired level of control.
Let's dive into each inventory database system in more detail to uncover key features and establish which might be the better option for your business.
Periodic Inventory Systems
TLDR: Periodic inventory counts aren’t designed to track inventory levels in real-time. Rather, they rely on a regular, yet intermittent, physical count.
The periodic inventory system is, as the name suggests, like a regularly scheduled check-up for your inventory. Rather than running inventory counts daily, adopting a periodic system allows companies to track inventory levels based on a fixed start and end date within a designated time period - most commonly weekly or monthly.
Here’s how periodic inventory works. Once physical inventory counts have been completed, you’ll need to compare the data from your count sheets or barcode scanners to your inventory records, identify discrepancies, and make the necessary adjustments in your periodic inventory control system database. This updated record of inventory items will guide your purchasing decisions until the next inventory count.
Want a top tip for more accurate accounting going forward? Analyzing and investigating significant discrepancies or patterns that emerge during the physical count - such as theft, inaccurate recording, or damaged items - can help you improve overall inventory control and identify areas for process enhancement going forward.
A Periodic Inventory Control System in Action
Imagine a small ecommerce company specializing in handcrafted jewelry. Because they only offer a small selection of unique pieces that are handmade and have limited availability, the company operates with a lean inventory - which makes utilizing a periodic inventory system more feasible.
Each month, the operations manager conducts a physical inventory count, noting the quantity of raw materials and the number of completed pieces left on the shelves. By comparing inventory quantities to purchase orders in the previous period, the team can manage inventory better by determining which raw materials need to be restocked for the upcoming month and which pieces jewelers need to prioritize making.
Pros of a Periodic Inventory System
Simplicity and ease of implementation
Suitable for businesses with limited resources or low inventory turnover
Lower cost compared to a more complex perpetual inventory system
Cons of a Periodic Inventory System
Lack of real-time inventory visibility
Higher risk of stockouts or excess stock
Limited ability to optimize inventory levels and respond quickly to changes in customer demand
Perpetual Inventory Systems
Unlike its periodic counterpart, a perpetual inventory system delivers precise and up-to-date information around the clock. 24 hours a day, 365 days a year. It’s essentially an ever-watchful eye over your entire inventory status.
A perpetual inventory control system is significantly more flexible than a periodic system because it continually updates your recorded inventory account when raw materials and items move through the supply chain as they are received, sold, and moved.
Although more precise, perpetual inventory control does require more technology - like barcode scanners and radio frequency identification (RFID) tags (more on those in the next section!) in conjunction with supporting inventory management software. However, by recording every transaction immediately, inventory managers are always guaranteed access to accurate real-time inventory tracking.
A Perpetual Inventory Control System in Action
Imagine an online retailer specializing in consumer electronics. They offer a vast range of products from various brands and experience high order volumes, frequent sales, and rapid changes in demand due to market trends and new product launches.
In this scenario, utilizing a perpetual system to manage inventory would be highly beneficial. The sheer volume of purchase orders moving through the system would make physical inventory counts out of date before they are even completed, making it impossible to manage warehouse inventory, order fulfillment, quality control, and safety stock levels across multi-channel operations.
Pros of a Perpetual Inventory System
Real-time inventory visibility and accurate cash flow accounting
Improved inventory security and quick identification of stockouts and excess stock
Ability to implement just-in-time inventory management strategies
Cons of a Perpetual Inventory System
Higher initial setup and maintenance costs
Dependence on inventory control software and technology infrastructure
Requires proper training and processes to prevent errors and discrepancies
Examples of Inventory Control Techniques
Regardless of whether you choose to employ a periodic or perpetual system, there are a variety of options that can turn inventory management from a chaotic mess into a well-oiled machine. From manual inventory management to cutting-edge inventory control software, let's explore all of your options.
The Old-School Way: The Manual Inventory Management System
Taking a manual approach is a bit like trying to tame a wild beast with your bare hands. It might be one of the most popular types of inventory control for small start-up businesses on a budget. But, honestly, we don't recommend it. Excel spreadsheets, Google Docs, and Quick Notes are a drain on your time and energy just to wind up with basic reports on your warehouse inventory that are overloaded with human error and don't actually lead to improving inventory controls in any kind of meaningful way.
Automated Inventory Management Systems: Leveraging Technology for Efficiency
Ah, the wondrous world of automated inventory control systems!
Leveraging technology truly revolutionizes the inventory control process, providing effortless oversight so you can correlate inventory items with purchase orders and cash flow with real-time visibility. Here are some examples of the most common inventory control techniques utilized by successful ecommerce businesses.
Barcode scanners are like magic wands for monitoring inventory movement – and as an extra bonus, they wave away the need for tedious data entry. With unique barcodes for each product and nifty handheld scanners, you can zap your inventory management woes away to your heart’s content. Simply scan raw materials and products as they come in, and scan them again when they go out. And voila! Your inventory records are magically updated.
Fun fact: QR stands for Quick Response. And that’s exactly what QR technology gives you. Because QR codes can be read either horizontally or vertically and can hold up to 7,000 digits, the amount of detailed information they can provide on your inventory items when they’re scanned is insane, allowing you to fine-tune the accuracy of your central database to within an inch of its life.
Radio Frequency Identification (RFID)
Prepare to enter the realm of high-tech wizardry! Actually, it’s not all that mystical. Although radio frequency identification may feel like a dance with invisible information, the process is pretty straightforward. Each product gets its own unique RFID tag containing information like product code, description, and price. Wave your RFID wand over it and the tags respond, transmitting data wirelessly to update inventory records via readers or antennas.
ERP-Based Inventory Management Systems: The Comprehensive Solution
Enterprise Resource Planning (ERP) systems bring some serious firepower to your inventory management game. What’s an ERP, you ask? Essentially, it’s an all-in-one inventory management system that’s equivalent to having your own personal grandmaster to orchestrate every aspect of your business operations.
Able to integrate multiple functions, including inventory control, inventory cost, sales, finance, and more, into a single cohesive platform, ERP technology allows you to become the three-eyed raven of the entire inventory control process and gain a truly holistic view of your business operations.
Cloud-based Inventory Management Systems
Buckle up, the clouds are calling! Cloud-based inventory control systems whisk your worries away to a faraway cloud – along with a complete and comprehensive copy of your entire recorded inventory.
With industry-leading cloud-based solutions like Linnworks and SkuVault at your disposal, inventory security is guaranteed and perpetual inventory data is easily accessible to all authorized members of your team at any time from any device. With all your data floating securely in the digital sky, you can track stock levels and types of inventory, manage purchases and sales, and generate reports - all without breaking a sweat.
AI-Driven Inventory Management Systems
Welcome to the future! Access to AI-driven inventory management systems is akin to employing an oracle with expert knowledge about all types of inventory control.
These clever systems use artificial intelligence and machine learning to analyze data, predict demand, and optimize your stock levels. They're like the Brainiacs of the inventory world, capable of crunching numbers and making smart decisions for you. Cool, huh?
6 Reasons to Invest in an Integrated Inventory Control and Inventory Management System
In the fast-paced world of ecommerce, having a well-implemented inventory control system is like having a superhero on your side. It brings order to the chaos, saves you from costly errors, and paves the way for smooth operations.
Let's explore a few of the reasons why ecommerce companies absolutely need inventory control systems in place if they're to succeed in rocking the socks off their business goals. And, of course, we'll let you know how investing in an inventory management system with Linnworks can help optimize your processes and save you from all types of inventory control chaos! A little shameless self-promotion never hurt anyone, right?
1. Real-Time Inventory Tracking
There’s no point in selling products like hotcakes if you have no idea how many cakes are left in the oven.
Unreliable inventory data is a common issue for growing retailers. But with a robust inventory control system, you gain instant visibility into your stock levels. Linnworks inventory management systems provide accurate and reliable inventory data in real-time, allowing you to optimize supply chain logistics to reduce the likelihood of overselling, mis-ships, or lost revenue. And the kicker? You get absolute, 100% oversight because you can track your inventory across multiple sales channels, warehouses, and locations. So, whether a customer orders on your website or through a marketplace, you'll know exactly how much inventory is available to fulfill their order.
2. Demand Forecasting
It’s a total game-changer when you finally realize that the subtle art of prediction is really not so subtle at all. It was actually more of an exact science than an art all along. All you needed was the right technology.
An inventory control system equipped with demand forecasting capabilities might feel like having a crystal ball. But it’s actually just the smart way to do business so you can optimize your inventory levels and keep your customers delighted. Offering historical sales data analysis, customer trends, and market insights, Linnworks provides a flexible platform that can grow and adjust with your business as it scales, helping you forecast future demand for all inventory items across evermore marketplaces.
3. Automated Reordering
Much like spinning plates while juggling flaming torches, manual reordering is a recipe for disaster!
A comprehensive inventory management system incorporates automation tools that can generate purchase orders and/or trigger supplier notifications when certain types of inventory fall below a specified threshold. That's precisely where Linnworks can help. Our inventory control software drives back-office efficiency, automating inventory management by setting intelligent reorder points and quantities based on demand forecasts, historical data, and predefined rules.
4. Accurate Order Fulfillment
When you fail to meet customer demand, your reputation can become tarnished. Not only will you lose business, but you’ll lose out on potentially lucrative word-of-mouth referrals too. Remember that although we're fully immersed in a digital age, word-of-mouth marketing hasn’t lost its relevance. And while 96% of unhappy customers won't complain to you directly, they'll likely share a poor experience with 9-15 people.
By synchronizing your inventory across various channels, inventory management systems help you prevent overselling mishaps. Linnworks platforms are designed for businesses dealing with varying types of inventory across multiple locations and sales channels. Our revolutionary software provides a central inventory database allowing for seamless integration and syncing helping you to manage allocations in all online storefronts, marketplaces, and offline stockrooms.
5. Cost Reduction
There’s an ancient ecommerce proverb: Inefficient inventory management can devour your resources quicker than a pack of hungry zombies at a brain buffet. OK, you got us. That's not a real proverb. We made it up. But you get the point.
Excess inventory ties up your capital while stockouts lead to missed sales opportunities. Linnworks inventory control systems help you strike the perfect balance, optimizing your inventory levels to reduce safety stock holding costs and increase profitability. By eliminating unnecessary inventory costs, manual errors, and preventing stockouts and overstocking, you'll minimize wastage and maximize your return on investment.
6. Improved Efficiency
Real superheroes don’t waste time. And if you want to be the hero of your own glorious inventory control success story, neither should you.
Reliable inventory control systems streamline your processes, freeing up valuable time and resources to spend on, well, pretty much anything other than inventory control! With features like batch tracking, order routing, and pick, pack and dispatch workflows, Linnworks' intuitive software unilaterally enhances efficiency across your entire organization. All you need to do is figure out what to do with all that extra time. Salsa dancing? Fire spinning? Poolside margaritas? The world is your oyster!
Top Tips and Expert Advice on Choosing The Right Inventory Control and Inventory Management Software
We'd like to think we've given you a pretty full rundown on what to look for already. And we'd also like to think you'll trust our recommendations. There's a reason our inventory management and automation solutions are trusted by over 4000 multichannel sellers and retailers worldwide, after all.
But, you don't have to take our word for it because there are plenty more industry experts willing to provide tips on effective inventory management. Also, we reached out to several leading SME leaders to get their input so we could provide you with some first-hand experiences. Here's a collection of their learnings on their quests to control inventory.
Recognizing the need for change - “You recognize its time to go from manual to software-based inventory management as your company expands, generates more sales, and manages more inventory.” - Tim Clarke, Sr. Reputation Manager at RizeReviews
Early adoption - “We invested in a high-quality inventory management system because we faced a supply-chain shortage not long after our launch. We would have been far less successful without it.” - Marcus Hutsen, Business Development Manager at Patriot Coolers
Prioritizing real-time tracking focus - “When looking for inventory control software, be sure to settle for one that provides real-time tracking and reporting, so that you can fully optimize your inventory control function. It should also be scalable, and come with customizable features that can cater to your business’s unique needs and processes.” - James Wilkinson, CEO at Balance One Supplements
Deciding what other tools you need - “A stock locator is the most accessible tool to use while tracking inventories. This allows the business to see where a product was placed on the shelves after being acquired and eliminates the list when it is chosen. Firms can save a ton of time by using this straightforward function.” - Tristan Harris, Demand Generation Senior Marketing Manager at Thrive Internet Marketing Agency
Shipping and logistics considerations - “Look for a system that offers pre-built integrations with major shipping carriers and logistics providers. This allows for automated order fulfillment, real-time tracking updates, and streamlined shipping label generation. It also eliminates manual data entry and reduces errors, which saves time, improves order accuracy, and enhances customer satisfaction.” - Normand Chevrette, President and CEO at CME Corp
How to Speed up Order Fulfillment and Achieve Accurate Inventory Tracking with Linnworks
No matter the size of your business or the types of inventory you stock, never underestimate the power of choosing the right supporting software. Once you’ve done your research on the various types of inventory control systems available to you, the steps to follow are easy:
Step 1: Invest in it
Step 2: Embrace it
Step 3: Watch your business soar to new heights.
When you get down to brass tacks, inventory movement is the backbone of your ecommerce business, and your chosen inventory management software is the secret ingredient to guaranteeing happy customers, higher profits, and a stress-free life.
Need help with better inventory management? Then it’s time to reach out to the good people at Linnworks.
Our team has all of the experience and expertise you need to make onboarding and implementation childs play - we even throw in Masterclass sessions to ensure system success and business growth. Key features of our intuitive, all-in-one inventory platform include:
Real-time inventory tracking and warehouse management.
Centralized cloud-based inventory management across multiple sales channels and locations.
Inbuilt demand forecasting and automated reordering.
Stress-free fulfillment via customized workflows and fulfillment options.
Accurate inventory synchronization and comprehensive reporting and analytics
Seamless integration with various ecommerce platforms and marketplaces.
Scalable growth solutions.
Dedicated customer support and training.
Need more convincing? Check out some of our awesome client reviews below:
An inventory control system is a set of tools that businesses use to track, manage, and organize product sales, material purchases, and other production processes. It helps maintain optimal inventory levels and increase operational efficiency.
What are the 3 inventory control systems?
The three main types of inventory control systems are the Perpetual Inventory System, which provides real-time inventory tracking; the Periodic Inventory System, where inventory is counted at specific intervals; and the Just-in-Time (JIT) Inventory System, where inventory is ordered and received just when needed in the production process.
A just-in-time inventory control system is also called what?
A Just-in-Time (JIT) inventory control system is also commonly referred to as a "demand-pull" system or "lean manufacturing" system. It aims to reduce costs by minimizing inventory and ordering goods only when needed for production or sales.
How are RFID systems used in inventory control?
RFID (Radio Frequency Identification) systems are used in inventory control to automatically track and identify inventory items. They use radio waves to read and capture data stored on a tag attached to an object, providing real-time updates and improving inventory accuracy.