What is Inventory Control

In the manufacturing environment, inventory represents a significant amount of investment of company’s capital. Therefore, it is essential for an organization to ensure that the right goods are at the right place at the right moment in order to avoid possible stock-outs, prevent from stock spoilage and to have smooth functioning of the organizational processes. Therefore, in order to manage the possible inventory imbalances and resultant operational issues, inventory control is considered as a necessity for an organization. Inventory control can be described as a process of supervising inventory supply, managing storage and accessibility in order to ensure the optimum level of inventory within the organization. This is also considered as an internal control, a procedure designed to assure work efficiency or avoid internal frauds and errors.

Three types of inventories are considered under inventory control.

1. Raw materials
2. Work-in-progress
3. Finished goods

Inventory Control Management

What is inventory control

Inventory management is a concept which focuses on the inventory as a value adding asset, so inventories are managed in a way that maximize organizational value, exposure and profit ability. It is a comprehensive process that involves product leveraging, product placement decisions, calculation of product velocities and turns,etc.

Process of locating inventories and managing them accordingly is identified as inventory control system that may be a manual or a digital one. Often this term, inventory management system refers to a software component specifically designed for inventory management. The technologies used in these systems are barcode scanning and RFID technology, where the relevant scanners directly identify the inventory objects and record respective transactions via mobile or fixed devices.

Inventory Control Techniques /Methods

Almost every business organizations have employed various inventory control methods to keep their inventories in check. These are the widely used ones.

1. ABC Analysis 

This is an inventory control system based on Pareto Theory, which indicates that 80% of the expenses spend on inventory consumption is based on 20% of the items. Therefore, this technique categorizes inventory into different identical classes known as A, B and C based on the annual consumption of items. After the classification is done, different efforts are put into several inventory classes depending on the monitory value criteria. Accordingly, strong control initiatives for class A items, moderate control for class B items and less control for class C items is guaranteed.

2. VED Analysis

VED refers for Viral, Essential and Desirable. Unlike the classification done under ABC Analysis, the stocks are classified based on the criticality of the inventory items. Here V class of items represents reasonably large amount of stocks which are necessary whereas D class of items do not need to be in store every time.

3. FSN Analysis

 This classification is done based on the storing issues of the organization where FSN stands for fast, slow moving and non-moving.

4. JIT 

JIT refers to the term Just-in-time. As per the name appears, JIT is an inventory control technique which focuses on the concept that, only if the orders are made the inventories will be requested by each other.


 Photo By: Emilio Labrador (CC BY 2.0)

About the Author: LPerera

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