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

Inventory Management vs. Inventory Control

Inventory management and inventory control are similar but have different focuses. Inventory management handles forecasting and ordering stock. Inventory control, also known as stock control, 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 at the level of the raw materials used as well as finished goods. Inventory management helps businesses identify which stock to order, how much to order and when.

Sometimes known as stock management, the practice involves tracking the lifecycle of raw and finished goods from the moment of ordering a product from suppliers to delivering it to customers and everything in between. Inventory management is a key part of the supply chain and ensures there is sufficient stock on hand to fulfill customer orders, but not more than a business can sell. For example, a taco truck can use inventory data to correctly predict it needs five pounds of tomatoes for a week. The business won’t waste money by throwing out overripe tomatoes that it can’t use. Similarly, an event planner won’t spend money renting extra space to store paper cups that she won’t use. Learn more about inventory management techniques.

Implementing an effective inventory management practice can help your business hold less inventory 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 decisions about inventory. Management can use this data to understand market potential, adjust pricing 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 regular checks of a small set of goods to confirm stock levels. Learn more by reading the guide to cycle counting.
  • Conducting audits to verify that inventory counts are correct as the stock moves through each stage.

See the guide to inventory management to learn more.

What Is Inventory Control?

Inventory control is a part of the inventory management process. It is the daily activity of managing stock within the warehouse. Inventory control activities include receiving, storing and 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 an overall efficient inventory management process. Defining the flow of stock ensures you have control over what items are used to fulfill customer orders, and when. Depending on your product portfolio you can dictate how product is deployed to fulfill customer orders. Some common inventory control methods are:

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

Warehouse organization also falls under inventory control. When a new product arrives, staff scan the barcode or RFID tag using a mobile scanner. Each product type received has a unique code. Companies can also assign high-value products unique codes. For example, an expensive device 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 from the retailer. The customer deals directly with the vendor supplying the goods (although they are not always aware of this arrangement). The vendor decides when to refill orders and how much 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 its expiration date.
  • Locating popular items near packing areas to speed order fulfillment.

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

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

Differences Between Inventory Control and Inventory Management

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

Similarities of Inventory Control and Inventory Management

Both inventory control and inventory management track and manage stock. Inventory control is a 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 mobile devices 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. They suggest 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 is going from an inventory standpoint. To them, inventory management must come before inventory control.

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 may use a separate solution for each task. Ideally, you want the inventory systems to communicate 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 their inventory across multiple warehouses, and many also utilize a 3PL to store some stock. All of this adds complexity to managing your inventory efficiently and effectively. A system that gives visibility to track inventory across multiple locations enables you to use your inventory more effectively and keep less inventory on hand.

An inventory management system enables seamless communication and tracking of products across the globe. These systems also have APIs that connect with many enterprise resource planning (ERP) systems. Companies with multiple warehouses and multiple selling channels use ERP to coordinate their inventory management systems. ERP generates real-time product, cost, supply and demand information so companies do not need to keep as much inventory on-hand, can better meet customer demand and plan for market fluctuations. Learn more about “Choosing the Right Inventory Management 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 and fulfillment process.
  • Inventory Traceability:
    Tracks lots or serial numbers from end to end, 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 the right amount of stock.
  • Inventory Forecasting:
    Predicts how much you will sell based on past trends and historical data.
  • Inventory Control:
    Uses a big-picture analysis to manage the end-to-end process and warehouse layout.
  • Inventory Optimization:
    Maintains the right stock and quantities at the 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 best systems are able to scale as you add more products and facilities. They are customizable and integrate 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 of orders and returns.
  • Real-Time Updates:
    Watches stock status, minute-by-minute.
  • Notifications:
    Warns about low stock, expiring items and overstocked items and reorders stock to maintain proper inventory.
  • Audits and Reports:
    Audits stock to track patterns and reports the results.

Inventory Control System vs. Inventory Management System

The following table of features for inventory control and inventory management systems can help you decide whether you need one of the systems or both.

Inventory Control System Inventory Management System
Manages existing stock and warehouse layout. The system also tracks the condition of stock. Plans stock replenishments and forecasts future demand. Gauges order cycles and the amount and type of items. Automatically orders inventory.
Receives new inventory and returns and processes transfers. Manages demand planning and forecasting.
Manages pick-and-pack inventory for shipping. Decides safety stock, reorder cycles and replenishment stock.
Uses barcode or RFID to trace and record stock transactions. Gathers near- and real-time data using barcode or RFID and finds trends to prevent stockouts and overstocks.
Tracks receipt, transfer or packing of items by lot or serial number, pallet, location or date and notes where the stock resides in the warehouse. Traces and supports inventory processing as items move through warehousing and production phases to delivery or sales.
Manages sales invoices and orders for suppliers. Finds obsolete inventory.
Sends alerts about low stock levels or expiration dates. Improves warehouse layout and storage of stock.
Supports physical and cycle counts, audits inventory and generates reports. Supports physical and cycle counts.

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 to evaluating potential solutions, there are a few steps that can get you started:

  1. Evaluate your existing inventory solution, and identify places for improvement and like-to-have features.
  2. Talk to your warehouse staff and suppliers to find out if you need a solution that integrates with other systems.
  3. Different companies will offer a variety of inventory management options. Still, at the very least, you want to ensure the solution you choose will support automated replenishment, cycle counting and traceability. Find out more about these features by reading “3 Key Features to Look for When Selecting Inventory Management Software.”

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

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NetSuite Can Help Provide Visibility and Insight Into Your Inventory

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

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