Inventory Control

What is the point of inventory control?

A man takes inventory on his laptop in a warehouse, while talking on the phone.

Inventory control is all about hitting the sweet spot of inventory management: you’ve got enough stuff to meet demand, but not so much you’re wasting money holding onto it. In this article, we’ll help you understand why inventory control is so important. 

What is the point of inventory control?

The point of inventory control is to ensure a business can meet demand for stock while spending as little money as possible holding on to it. 

In other words, inventory control helps keep businesses both productive and profitable by ensuring there’s always enough of a given product to get the job done, but not so much of it that money (or time, or space) is being wasted.

How to practice inventory control 

Inventory control is simple in theory, and complicated in practice. It’s both a science and an art. But there are several formulas and strategies that can help you make better ordering decisions.

These methods, which are outlined in our Inventory Control 101 guide, are key components of mastering inventory control.

Economic order quantity (EOQ) is a special formula that reveals how much inventory a business should order to keep costs low but not worry about a stockout. Another formula, the reorder point formula, pinpoints when you should order stock for premium inventory control. 

Of course, you’ll also need to think about safety stock. Safety stock refers to that buffer of product you keep just in case something extraordinary (like a blizzard, a strike or a stay-at-home order!) occurs. 

The Pareto principle

The Pareto principle, also known as ABC analysis, helps you determine which inventory is most important to have in stock. 

Category A items are the items in your inventory that account for 70% of your profits. These items, which are about 20% of your inventory, should be stocked very carefully. Category B items are about 25% of your revenue, and about 30% of your stock. These items are important, but not ultra-important. Finally, Category C is half of your inventory, but the products account only for 5% of your revenue. Inventory control is least important for this group. 

Inventory management software for better inventory control 

It’s pretty hard to calculate key inventory control formulas, ratios and principles when you don’t have any numbers or figures to lean on. That’s why modern, digital inventory management software can be so helpful! It’s easy to plug in numbers, generate custom reports and understand how your stock has been used over certain periods of time. 

Unfortunately, most inventory management software is really expensive and highly technical. 

Sortly is inventory management software, but in an easy-to-use app. With features like QR code/barcode scanning, customizable folders and tags, instant reports and bulk importing, getting your inventory under control is easy. 

Want to use Sortly to get your inventory under control? Get started with a free trial today!