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What is inventory control? Definition, importance and methods.

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Inventory Management
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As an ecommerce retailer, you’re probably constantly moving between a lot of different tasks. And balancing consumer demand with ever-changing supply chain challenges can feel like the ultimate challenge. 

When it comes to pulling this off—one thing can help turn your business into a star performer—and that’s accurate inventory control.  

Moving away from ad-hoc inventory control is well worth the effort. And luckily, technology is here to help. Taking the time to transform your inventory control from average to outstanding leads to plenty of benefits, including improving your customer journey, reducing costs, and helping you find that perfect balance between supply and demand. 

Inventory control definition. 

Inventory control is the process used to ensure you’re keeping the optimum stock levels for individual products. The goal is to assess then optimize your storage and stock levels so that you’ve got just the correct number of each product on hand at all times. 

Inventory control vs. inventory management.

You might sometimes see these terms being used interchangeably—but there are a few important differences between the two. First, inventory control is part of the larger topic of inventory management

Inventory control refers specifically to one section of your inventory management strategy—at a focused, operations level. This can involve your warehouse management system, real-time inventory tracking, and your process when scanning in new stock deliveries.    

Why is inventory control important?

Inventory control is a vital part—perhaps the most crucial part—of your inventory management strategy. When you get your inventory control right, everything flows smoothly. But when you get it wrong, everything seems to go downhill fast. Here’s a quick rundown of the four main ways accurate inventory control can help your ecommerce business.  

Maintain Accuracy 

If you know exactly how many units of each item you have in real-time, it’s far easier to get an accurate picture of how these levels change over time. The best way to achieve this aspect of inventory control is with tracking software to monitor stock levels digitally.  

Helps You Measure Changes 

Inventory control starts with having an accurate picture of your overall stock levels, but it doesn’t end there. You also need to consider how the levels of your stock change over time. Sales for specific items aren’t even going to be linear across an entire year, and you’ll find peaks and troughs over the course of a year. The key is tracking those changes and adjusting your stock levels accordingly. 

Inventory control helps you predict downstream purchasing activities over time and adjust your upstream ordering, manufacturing, and deliveries as a result. Measuring these changes might help you identify.    

Reduces Write-Offs

Accurate inventory control helps to decrease write-offs. If you overstock on seasonal products, lost items due to poor inventory control, or suffered from stock damage, you’ll need to write those items off. Write-offs not only decrease your profit, but they’re hugely wasteful. 

Balances Supply and Demand 

Accurate inventory control helps you balance supply and demand. The goal is to keep just enough inventory to meet demand without over or understocking. Overstocking means you might end up with too much of a specific item that you can’t sell or be paying for a larger warehouse than you really need. Understocking means you’re in danger of not fulfilling orders significantly if supply chain issues delay shipments of new products. 

Accurate inventory control relies on demand forecasting, and using these two strategies together is a recipe for success. 

An example of inventory control.

Let’s take a look at an example of inventory control in action. 

A sustainable beauty company has just launched a new range of products. They ordered 5,000 units of each new product. The majority of items are all selling well, but when reviewing stock levels, their inventory control manager can see that one product isn’t selling as well as the others. As well as taking up warehouse space, these products have a limited shelf-life.  

At this point, a decision needs to be made on how to move this stock on as soon as possible. Some strategies include offering them at a discounted price or adding them to a bundle with other higher-selling items to increase turnover.   

In some reviews on the product, the customer service department noted that the smell of this particular formulation isn’t very appealing. The lack of turnover on this product could result from customers reading these reviews before purchasing the product. A note is made to revisit the formulation in the future to resolve this issue.  

Inventory control methods. 

Controlling your inventory accurately and efficiently relies on a few different methods and best practices. Let’s take a look at those now. 

Real-time Inventory Tracking 

Having the ability to monitor your stock levels in real-time using inventory management software is a powerful way to stay in complete control of your inventory. Knowing exactly where each product is stored within your warehouse, as well as when they get shipped to customers, means you’re always one step ahead. 

This makes it much easier to make fast decisions regarding reordering, redistributing stock between warehouses, and adjusting the number of units you’re keeping in stock. If stock levels are starting to run low, you can also communicate this more easily. 

Establish Accurate Reorder Points

Reorder points are set when you reach a specific level of stock for each product. Reordering when you reach this point will reduce the chances of selling out of stock ultimately. Tracking the inventory of each unique SKU and setting reorder points for each of them is necessary, as some items sell faster than others. The good news is that once your reorder points are set, you can set up automated reordering. This system is far more efficient than manually checking stock. 

Define Status For Each Item

Depending on your ecommerce business, you won’t always want to keep all items in stock all of the time. For example, if you stock seasonal items or have a high turnover of new products, the levels of each item kept in stock will vary throughout the year. For other items, you may want to keep fairly similar stock levels throughout the year. Deciding to designate an item as a non-stocked item for part of the year helps save warehouse space and reduces the chance of stock being written off. 

Maintain Quality Control

Quality control relies a lot on inventory control. When you’ve got detailed information about the number of each item in stock and what batch they belong to, you can keep on top of monitoring quality. This also means you can act quickly if you need to make product recalls. 

Make Warehouse Zoning Easier 

As your business grows, maintaining efficiency within your warehouse becomes more and more critical. For example, if your staff doesn’t know where a particular product is, they’re going to waste time trying to track it down. Inventory control can help you optimize your warehouse zoning. For example, you might decide to zone all products with a high turnover in the same, easily accessible area. Or group products that are frequently ordered together in the same location. 

Make Auditing Easier 

Audits might not be your favorite part of the job—but the good news is that inventory tracking can make this easier. Being able to access real-time stock levels means auditing takes less time. You’ll also be able to identify potential issues more quickly and deal with any problems as and when they come up.    

Take control of your inventory.

Your inventory is one of your most important assets, so it makes sense to find an efficient system to help you manage it. By controlling your inventory accurately, you can increase sales, reduce losses, and boost efficiency. You can also optimize your customer’s experience by ensuring their favorite products are always in stock and shipped to them as fast as possible. 

Inventory control doesn’t have to be complicated either—by using real-time updates from your inventory management software, you can take control of your inventory—instead of letting it control you.   

Learn more about how you can use Linnworks inventory management software to control your inventory. Download the Linnworks Total Commerce Guide to Automation.

Read our guide on the best inventory control software solutions.

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