Tips For Effective Stock Control and Inventory Management


Date: 25 Jan 2023

An inventory manager's guide to stock control


Stock control is essential to any business because it reveals how a company manages its inventory and the amount of stock available at any given time. 

The following sections will cover how to set up stock control methods and choose the right type to help your business succeed.


An inventory manager's guide to stock control

What is stock control?

Main components of stock control

Minimum stock levels

Maximum stock levels

The complete inventory and control stock level is the most of any item you require in stock.

Reorder point

Why is stock control important?

Improves forecasting accuracy

Reduces dead stock levels

Eliminate stock outs

Identify slow-moving products

Improves cash flow

Improves customer experience

Primary methods of stock control

Just In Time (JIT)

First-in, first-out (FIFO)

Economic order quantity (EOQ)

Vendor-managed inventory

Batch control

What is a stock control system?

Manual system

Stock cards system

Spreadsheets system

Stock management software

Types of inventory control

Perpetual inventory control

Periodic inventory control

Stock control best practices

Understand your minimum stock levels

Categories stock using ABC analysis

Optimize warehouse storage procedures

Establish optimal reorder points

Carry safety stock for critical items

Build strong supplier relationships

Generate automated reports

Conduct risk assessments

Reconcile stock and order volumes

Invest in a stock control system

What to look for when Purchasing a Stock Control System

Inventory tracking in real time

Aids in the procurement process

Connects to other business systems

Real-time inventory value reports

Inventory alerts are automated.

Inventory reports in detail

Coverage of multiple warehouses

Inventory control KPIs to monitor

Inventory-to-sales ratio

Rate of resale

Inventory on average

Backorder percentage

Inventory turnover rate

The ratio of lost sales

Inventory reduction

Carrying expenses

What is stock control?

Stock control, also known as inventory control or inventory management, is the collection of processes involved in maintaining adequate stock levels. To satisfy customer demand without causing shipping delays, preparing the proper amount of stock in hand is critical. 

Stock management applies to all items used at various stages of production, from raw materials to finished goods. However, stock control entails more than simply tracking the location of products. Ideal stock control procedures ensure that capital is not wasted and aid in the prevention of supply chain issues.

Keeping track of stock may appear simple, but extenuating circumstances such as economic instability and even weather events can make predictions difficult, necessitating more advanced inventory management methods.

Main components of stock control

  • Minimum stock levels

A company's minimum stock level is the smallest amount of any product that it should keep on hand.

When using a recommended stock control method, a business may face a revenue loss due to unmet demand whenever a stock level falls below the minimum.

  • Maximum stock levels

The complete inventory and control stock level is the most of any item you require in stock. Keeping too much stock can be costly, so not going over may be critical to your business. Some businesses, however, prefer to keep a large amount of stock on hand for reasons such as high product turnover, long supply timelines, or anticipated price increases.

  • Reorder point

A reorder point is a stock level that indicates the need to reorder. A reorder point is advantageous because it eliminates uncertainty and keeps a company well-stocked.


Why is stock control important?


Stock control is a critical business component; without it, unanticipated needs may result in revenue loss.


  • Improves forecasting accuracy


Keeping accurate inventory data allows for precise forecasting of stock needs and efficient stock control.


Precise inventory figures, such as bestseller lists, storage prices, inbound and outgoing stock, and seasonal figures, strengthen your ability to manage stock control effectively. Effective stock control methods allow your organization to plan for unforeseen circumstances.


  • Reduces dead stock levels

The unsold inventory indicates that your company has spent capital that the company can spend elsewhere. Deadstock means that your stock control method needs to be improved, whether the money could be used to purchase more popular items or to invest in new machinery. Effective stock management methods use historical data to determine optimal figures when buying stock, ensuring that capital is spent wisely.

  • Eliminate stock outs

Stockouts are caused by a lack of anticipation and result in poor customer experiences when a given stock item runs out. Forecasting should be refined using an effective stock control method. It is paramount to maintain ideal levels of stock. Too much inventory depletes capital, while too little jeopardizes revenue.


  • Identify slow-moving products


Identifying slow-moving products may be more difficult without a stock control method. 


  • Improves cash flow


With proper inventory management, your stock is a collection of unsold assets once sold. You lose money when your stock does not sell or needs more. When inventory sits, it depletes resources.

Efficient stock management entails keeping the proper inventory levels in your business and selling the correct levels. When this occurs, you have more capital to invest elsewhere, maximizing your cash flow.

  • Improves customer experience


Maintaining adequate inventory levels fosters customer trust and satisfaction. Customers who come to you for a product or service want to know you will have what they require.

Poor stock control management may result in inventory falling below the minimum, resulting in a stockout and revenue loss. Customer satisfaction is essential to run a smooth business. 

Primary methods of stock control

Various methods can be used to predict future market demand accurately. You can help lead your company to a more profitable position using a recommended practice.

  • Just In Time (JIT)

JIT is intended to reduce stock carrying costs and waste and increase efficiency.

While this method can increase cash flow and lower storage costs, the demand forecast must be accurate, or the result could be a stockout or lost revenue.

  • First-in, first-out (FIFO)


The FIFO principle states that the first inventory acquired is the first inventory sold. The FIFO method has advantages, such as simple calculations to determine the costs and value of stock despite price changes. In addition, the products with the oldest receiving date are chosen and sold first.

  • Economic order quantity (EOQ)

Most businesses want to keep their inventory optimally while minimizing costs and maximizing warehouse space. The EOQ method was developed to identify the optimal list. Ordering mindfully allows you to avoid stockouts and keep track of your safety stock levels. You'll need your holding costs, annual demand, and order cost to calculate your EOQ.

  • Vendor-managed inventory

The vendor-managed inventory method, becoming increasingly popular, is a hands-off approach delegated to a third party.


The vendor-managed inventory strategy allows you to pay for inventory only after it has been sold. The company sells its goods but never physically holds stock because the vendor ships the goods directly to the customer Furthermore, the vendor assumes all risks associated with stock management, allowing businesses to operate with less stress.


  • Batch control


When a company needs to keep track of each item, the batch control method comes in handy. Each product is typically labelled with an SKU (pronounced "skew") code.

These codes may include serial numbers or expiration dates, which can be helpful for businesses selling food or medical supplies with expiration dates.


What is a stock control system?


A stock control system includes all the tasks required for adequate inventory and stock management, such as product tracking, turnover rate, shipping and receiving, storage inputs, and reorders.


A stock control system is similar to an inventory management system, and both can be delivered in the following ways:

  1. Manual system

Some businesses prefer the old-fashioned method of writing everything down on paper. You can track your products using stock books, cards, and spreadsheets. It may work for some businesses and might not work for others as the business grows. 


  1. Stock cards system


A stock card, also known as a bin card, contains the following:


  • A table that tracks a product's running unit price

  • Sales price.

  • The number of articles in the inventory 


This system can also track purchases, b returns, and other activities. However, for a stock card system to work, it must be used consistently and updated regularly; otherwise, inaccurate data will cause problems.


3. Spreadsheets system


Spreadsheets such as Excel can handle large amounts of data without using an automated system. Product data can be captured using a spreadsheet when consistent updates are made. Customization is possible, which can be helpful when integrating coding, high-level macros, or other systems.


4. Stock management software


Inventory management software is frequently relatively inexpensive for small businesses.


Through stock management software, businesses can track stock counts in real-time, incorporate analytics, run cost comparisons and inventory reports, identify dead stock, and track customer patterns. Furthermore, simple software can often be scaled to include more functionality as your company grows.

Types of inventory control


Companies can track their inventory using two types of systems: periodic systems and perpetual systems.


  • Perpetual inventory control


Perpetual inventory control systems are frequently more expensive than periodic systems but provide more accurate and up-to-date information.


When you use an automated system, you always know how much stock your inventory has. Perpetual tracking systems are generally superior to periodic systems and are an excellent choice for avoiding stockouts.


While perpetual inventory systems eliminate the need for most manual labor, manual stock counts are still required to ensure accuracy.


  • Periodic inventory control


Because it does not require intelligent software or scanning, the periodic inventory system is used by many small businesses.

While this system may appear more straightforward because it does not require consistent record-keeping, regular inventory counts are necessary to track inventory. When physically counting inventory, a business may need to postpone all regular duties.

Stock control best practices


Some businesses need help understanding how to manage stock control. Several factors contribute to an efficient process, but you can get started with the following pointers.


  • Understand your minimum stock levels


Stock control refers to various aspects of inventory management, one of which is your minimum stock control levels.


Having a precise number of items you must keep in your inventory at all times allows you to see when to order more with certainty. Automating your purchasing process can help free you up for more critical tasks.


  • Categories stock using ABC analysis


ABC analysis is a technique for categorizing inventory. Picking, packing, and tracking become easier by arranging products to create a tier of the most important to most miniature essential items.

A-level products, for example, are the most important and must be replenished regularly. B-level items are medium-value stock that must be reordered periodically. Finally, C-level inventory is delivered via minimal ordering.


  • Optimize warehouse storage procedures


The efficient use of warehouse storage is beneficial to operations. Effective inventory management is essential. Effective storage control makes fulfillment more accessible.


  • Establish optimal reorder points


Identifying a distinct reordering point Using a reorder point formula ensures you always have enough stock.


Increased demand and market slumps can take you by surprise. Mathematical equations, like a reorder point formula, can help you get your orders right the first time.


Furthermore, effective stock management can help your business and keep you in a good position during difficult economic times.


  • Carry safety stock for critical items


All businesses require a safety stock. When your inventory runs out, you risk losing customers and revenue. Carrying emergency supplies to cover unexpected events can ensure that you always have products to sell.

Customers dissatisfied with your service may leave if you don't have a backup plan.


  • Build strong supplier relationships


Relationships play an essential role in success of the business. Not only are relationships with customers important, but so are relationships with suppliers.


Paying your invoices promptly and communicating respectfully with your suppliers makes it easy for them to be good to you. When you're in a difficult situation, a supplier who enjoys working with you is more likely to offer assistance.


  • Generate automated reports


Inventory control systems can track large amounts of data, but they are only helpful with analysis. Many systems can generate reports automatically for stock logs, inventory statuses, historical data, and financials, providing insight into your company's needs.


Sharing these reports with suppliers may also assist your company in acquiring inventory by allowing them to prepare for your requirements.


  • Conduct risk assessments


Any business must deal with risk. Preparing for unforeseen circumstances is critical to success, whether inventory mistakes, a sales spike or cash flow issues. Conducting regular risk assessments to determine worst-case scenarios and planning how to deal with them could save you when they occur.


  • Reconcile stock and order volumes


Accurate stock data is required for a company to remain profitable. Sorting through the numbers to determine what is selling and sitting can aid in reconciling stock and order volumes.


Furthermore, comparing how quickly some items sell versus how slowly others sell can help you identify where changes are to be made, allowing you to make more informed decisions.


  • Invest in a stock control system


Inventory management software can automate time-consuming stock control procedures, allowing you to focus on more critical tasks.


Intelligent software, such as BUSY, ensures that you always have popular items and provides insight into your inventory in ways you might not have noticed otherwise. You can make better decisions if you thoroughly understand your business.


What to look for when Purchasing a Stock Control System


A stock control system must meet the needs of various businesses. Select the best approach for your needs to optimize your inventory management process.


  • Inventory tracking in real time


Customer service and success are frequently dependent on real-time inventory tracking. Recognizing how much you have, how much of it you have, and where it is can help you fulfill orders quickly and keep consumers happy.

Inventory is constantly moving in many businesses, and because orders are processed quickly, real-time tracking ensures accurate insight into what's going on in your business at any given time.


  • Aids in the procurement process


When you don't have a good handle on your inventory, it can be challenging to know what to buy and when. The intelligent stock control software can assist you in gaining control of your procurement process. Making smarter decisions for your team means understanding your stock. Both its location and value are known.

The intelligent stock control software can automate purchase orders, view transaction history, store supplier discounts, and refund purchase orders for damaged goods.


  • Connects to other business systems


Effective stock control software should be compatible with your current business processes. Investing in software that interacts with your accounting back end and customer relationship management (CRM) system might be necessary for integrated stock control.


  • Real-time inventory value reports


Recognizing what you currently have in stock is vital, but so is knowing how much it is worth. Finance executives must always consider where a company's value lies.


Inventory management software that accounts for volume, price, and currency variations can aid valuation. Furthermore, the ability to track variables such as courier fees and waste and a live view of your profit margin can provide helpful information.


  • Inventory alerts are automated.

The innovative stock control software will not only keep track of your inventory but also prevent stockouts in your warehouse. Automatic alerts when stock is low should assist you in quickly creating purchase orders and mitigating losses.


  • Inventory reports in detail

Inventory tracking software should also provide detailed information in an easily digestible report. Administrative tasks are reduced by producing useful reports, providing insight into potential problems, and making operations more efficient. The desirable features are the turnover rate, stock age, unit sales, margins, and backorder rate.


  • Coverage of multiple warehouses

An enterprise's inventory can only be tracked with software to track multiple warehouses across vast areas. More extensive operations necessitate integrating software that can operate over long distances.

Inventory control KPIs to monitor


Different KPIs can provide helpful information. Here are a few more popular ones for inventory management and stock control.


  • Inventory-to-sales ratio


The stock-to-sales ratio compares the amount of inventory on hand to the number of sales. The calculation can be used to adjust the stock to maintain higher margins.

  •  Rate of resale

The sell-through rate compares inventory sold and inventory received from a manufacturer to assess supply chain efficiency.

  • Inventory on average


The average inventory figure is derived from the company's amount of stock over a given period. Businesses should strive to maintain a consistent average inventory figure over a year.


  • Backorder percentage

The backorder rate is the number of orders a company cannot fulfil when an order is placed, indicating how well a company stocks its popular products.

  • Inventory turnover rate

The inventory turnover ratio, commonly known as the stock turnover rate, measures how frequently a corporation sells and replaces inventory in a particular period. The formula is used to calculate the amount of stock that the company is selling.


  • The ratio of lost sales


The lost sales ratio compares the days a product is out of stock to the expected sales rate, indicating when a company is understocking a product.


  • Inventory reduction

Inventory reduction is the amount of product a company should have in stock but cannot account for due to theft, miscounts, damage, or fraud.

  • Carrying expenses

Carrying costs, also known as holding costs, are the percentage of value a company pays to keep inventory in storage, including rent and labour