Inventory Control vs. Inventory Management: Which Does What? (2024)

This article outlines the differences between inventory control and inventory management, aswell as how they work together. It also covers features to consider when looking for aninventory system for your business.

Inventory Management vs. Inventory Control

Inventory management and inventory control are similar but have different focuses. Inventorymanagement handles forecasting and ordering stock. Inventory control, also known as stockcontrol, is a part of inventory management that handles the stock on-hand.

What Is Inventory Management?

Inventory management manages the process of ordering, storing and using inventory, both atthe level of the raw materials used as well as finished goods. Inventory management helpsbusinesses identify which stock to order, how much to order and when.

Sometimes known as stock management, the practice involves tracking the lifecycle of raw andfinished goods from the moment of ordering a product from suppliers to delivering it tocustomers and everything in between. Inventory management is a key part of the supply chainand ensures there is sufficient stock on hand to fulfill customer orders, but not more thana business can sell. For example, a taco truck can use inventory data to correctly predictit needs five pounds of tomatoes for a week. The business won’t waste money bythrowing outoverripe tomatoes that it can’t use. Similarly, an event planner won’t spendmoney rentingextra space to store paper cups that she won’t use. Learn more about inventorymanagementtechniques.

Implementing an effective inventory management practice can help your business hold lessinventory on hand, increase order fulfillment accuracy and decrease costs.

Some of the fundamental elements of inventory management include:

• Managing stock end-to-end, from ordering to selling.
• Forecasting demand using past sales data to estimate future customer product demand.With a better understanding of possible demand, companies can make better decisionsabout inventory. Management can use this data to understand market potential, adjustpricing and identify ways to grow.
• Determining when to replenish stock.
• Tracking inventory turns, or how often an item sells or moves within a certain time.
• Performing cycle counts, or regularchecks of a small set of goods to confirm stock levels. Learn more by reading the guide to cyclecounting.
• Conducting audits to verify that inventory counts are correct as the stock moves througheach stage.

See the guide to inventorymanagement to learnmore.

What Is Inventory Control?

Inventory control is a part of the inventory management process. It is the daily activity ofmanaging stock within the warehouse. Inventory control activities include receiving, storingand transferring stock, as well as tracking and fulfilling orders and returns.

Taking control over your stock rotation is an important part of inventory control and anoverall efficient inventory management process. Defining the flow of stock ensures you havecontrol over what items are used to fulfill customer orders, and when. Depending on yourproduct portfolio you can dictate how product is deployed to fulfill customer orders. Somecommon inventory control methods are:

• FIFO (First in, First out) – the oldest inventory is used first to fulfillcustomerorders.
• LIFO (Last in, First out) – the inventory received most recently is used tofulfillcustomer orders.
• FEFO (First expiring, First out) – the inventory closest to its expiration date isusedto fulfill customer orders.

Warehouse organization also falls under inventory control. When a new product arrives, staffscan the barcode or RFID tag using a mobile scanner. Each product type received has a uniquecode. Companies can also assign high-value products unique codes. For example, an expensivedevice such as a high-end sound system can be tagged based on its unique serial number.

The team checks inbound shipments and notes delivery details. When a product is sold,fulfillment records and packs orders to go out.

Vendor-managed inventory (VMI) is the business model that removes inventory management fromthe retailer. The customer deals directly with the vendor supplying the goods (although theyare not always aware of this arrangement). The vendor decides when to refill orders and howmuch to send. Often these choices are based on data it receives from point-of-sale (POS)systems.

Some of the fundamental elements of inventory control include:

• Putting stock away and tracking its exact location within a warehouse.
• Ensuring stock stays in good condition, with no spoilage, and is used before itsexpiration date.
• Locating popular items near packing areas to speed order fulfillment.

The benefits of inventory control can include higher revenue and happier customers. When youtrack stock accurately, you reduce stockouts and backorders. Reducing excess stock andobsolete inventory can help eliminate spoilage and remove added storage costs.

Learn more about inventory control in this “Essential Guide to InventoryControl.”

Differences Between Inventory Control and Inventory Management

Inventory control is responsible for the movement of inventory within the warehouse. Withstock control, you track which goods or materials you have and in which quantities. You alsotrack the condition and status of items. By contrast, inventory management encompasses theentire process of forecasting demand, ordering and managing stock on hand. This practicelooks to the future to see what customers will want to purchase and places ordersaccordingly.

Similarities of Inventory Control and Inventory Management

Both inventory control and inventory management track and manage stock. Inventory control isa part of the overall inventory management process and tracks daily trends for each item.Inventory management follows broader trends over longer periods. Both practices use mobiledevices to for barcodes and radio frequency identification (RFID) scans for precise,real-time updates.

Which Do You Take Care of First: Inventory Control or Inventory Management?

Some experts believe that successful stock management starts with good stock control. Theysuggest you begin by understanding which stock is in your warehouse and its condition. Next,review strategic topics, such as warehouse location and layout, forecasts and seasonality.Finally, adjust stock types, quantities and order cycles to meet changes in demand,suppliers and events.

According to other experts, the real profit comes once you understand where your business isgoing from an inventory standpoint. To them, inventory management must come before inventorycontrol.

Inventory Management Systems vs. Inventory Control Systems

Inventory management systems and inventory control systems are both tools to manage stock.You may use one program with features for both inventory management and control, or you mayuse a separate solution for each task. Ideally, you want the inventory systems tocommunicate with each other.

Inventory Management System

The majority of businesses today are selling through multiple channels, such as online,in-store and through third-party retailers. Additionally, many businesses store theirinventory across multiple warehouses, and many also utilize a 3PL to store some stock. Allof this adds complexity to managing your inventory efficiently and effectively. A systemthat gives visibility to track inventory across multiple locations enables you to use yourinventory more effectively and keep less inventory on hand.

An inventory management system enables seamless communication and tracking of products acrossthe globe. These systems also have APIs that connect with many enterprise resource planning (ERP) systems. Companies withmultiple warehouses and multiple selling channels use ERP to coordinate their inventorymanagement systems. ERP generates real-time product, cost, supply and demand information socompanies do not need to keep as much inventory on-hand, can better meet customer demand andplan for market fluctuations. Learn more about “Choosing the Right InventoryManagement System.”

Key features of an inventory management system include:

• Item Master:
  Traces inventory by size, color, lot, serial number,bundle or kit.
• Order Management:
  Provides a view into the complete order andfulfillment process.
• Inventory Traceability:
  Tracks lots or serial numbers from end toend, from raw materials to production to distribution.
• Inventory Auditing:
  Enables both physical counts and cycle inventory.
• Reporting:
  Watches and reports on inventory trends.
• Demand Planning:
  Helps you predict product demand, so you order theright amount of stock.
• Inventory Forecasting:
  Predicts how much you will sell based onpast trends and historical data.
• Inventory Control:
  Uses a big-picture analysis to manage theend-to-end process and warehouse layout.
• Inventory Optimization:
  Maintains the right stock and quantities atthe lowest carrying costs, so you never have too much or too little.

Inventory Control System

An inventory control system manages the day-to-day stock and warehouse activities. The bestsystems are able to scale as you add more products and facilities. They are customizable andintegrate with ERP systems.

Key features of an inventory control system include:

• Inventory Tracking:
  Systems that report inventory quantities,product details and storage locations.
• Check-In/Check-Out:
  Tracks stock transfers and the movement oforders and returns.
• Real-Time Updates:
  Watches stock status, minute-by-minute.
• Notifications:
  Warns about low stock, expiring items andoverstocked items and reorders stock to maintain proper inventory.
• Audits and Reports:
  Audits stock to track patterns and reports theresults.

How to Choose the Right Inventory System for Your Company

Your inventory system has to fit the unique needs of your company. When it comes toevaluating potential solutions, there are a few steps that can get you started:

1. Evaluate your existing inventory solution, and identify places for improvement andlike-to-have features.
2. Talk to your warehouse staff and suppliers to find out if you need a solution thatintegrates with other systems.
3. Different companies will offer a variety of inventory management options. Still, at thevery least, you want to ensure the solution you choose will support automatedreplenishment, cycle counting and traceability. Find out more about these features byreading “3 Key Features to Look forWhen Selecting InventoryManagement Software.”

For a deep dive into all the inventory management features for all types of companies, readthe in-depth guide to inventorymanagementfeatures.

NetSuite Can Help Provide Visibility and Insight Into Your Inventory

Inventory management and inventory control work hand in hand. Having a solution thatincorporates both systems means you can eliminate redundancies and simplify tracking andreporting activities. Decision-makers know having the right tools is essential for effectiveinventory management. NetSuite offers a suite of native tools for tracking inventory inmultiple locations, determining reorder points and managing safety stock and cycle counts.Find the right balance between demand and supply across your entire organization with thedemand planning and distribution requirements planning features.

Learn more about how you can use NetSuite to help manageand control inventory to reduce handling costs and increase cash flow.