Inventory Control: Definition, Methods, Beginning

Inventory Control: Definition, Methods, Beginning

One of the important concepts for businesses engaged in production is stock. It is possible to define the concept of stock as the storage of the products required to continue production. However, it is important to note how many of these products will be stored. Because, in order to ensure profitability in production, reducing storage costs is also a method.

Although storing large quantities of raw materials provides an advantage over the purchase price; can cause increased storage costs of products. In addition, in cases where the demand in the market stops and the production slows down, there is a possibility that raw materials will be retained or may deteriorate. In order to avoid all these problems, it is necessary to determine how much product should be kept in stock by inventory control methods. The importance of the stock control method becomes apparent in order to monitor these activities of the enterprise financially.

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Definition of Inventory Control

Woman factory worker checking project inventory in a woodworking factory.

Inventory control refers to the follow-up and control of the amount of product that they have to hold in order to be able to continue their activities without disrupting, especially the production companies. When this method is applied in a balanced way, it provides great advantages for businesses. Balancing in the inventory control method means keeping the product at a level that does not interfere with the production or related activity and avoiding storing the excess. This method, which is one of the biggest needs of companies operating on a mass scale, makes a great contribution to increasing profitability. There are many methods used for inventory control. While the process of controlling the inventories is done with books in the classical period; Today, it is common to use digital-based programs with the technology providing opportunities in this direction.

Inventory Control Methods

Man stock recording

It is important to manage the stocks professionally in order to meet the demand increases experienced in certain periods and not to be caught unprepared for such opportunities. Some of the methods used for inventory control are:

  • ABC Inventory Control Method: The ABC control method, which is one of the methods that provide professional check of inventories, allows the products in stocks to be controlled separately in different categories. In this method, products in group A are generally few in number but high in price. On the other hand, the products in group C refer to products that are many in number and low in price. Group B includes products that are close to each other.
  • Visual Control Method: This is a very old and classic method. A warehouse clerk is appointed to control stocks. And this officer counts the products in the warehouse in periods determined by the business and keeps a report.
  • Fixed Order Method: In this method, the enterprise determines a certain level for the products in stock, and when those products come down to that level, the order is placed again.
  • Order Period Method: In the order period method, the calendar determined by the enterprise to buy products is followed, not the number of products in stock.

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How to Start?

Man Doing Stock Inventory

In order to start the stock control method, businesses must first determine a control method for them. Then, inventories should be continuously updated in line with this determining method. However, periodic increases in demand amounts should be taken into consideration here. If the inventory control is wrong, there may be problems in production or placing on the market. This causes the company to lose its connection with the market and lose its place in the competition in the long run. It is also possible to use the software produced for this purpose to control the stocks. Compared to manual inventory records, this method saves in many ways.

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