Open In App

Types of Inventory Control

What is Inventory Control?

Inventory control is the process of managing and overseeing a company’s inventory. It involves monitoring and managing the flow of goods from manufacturers to warehouses and then to retail outlets or directly to customers. The primary goal of inventory control is to ensure that the right amount of inventory is available at the right time, in the right place, and at the right cost. Effective inventory control helps businesses reduce carrying costs, prevent stockouts and overstock situations, improve cash flow, and enhance customer satisfaction by ensuring products are available when needed.



Key Takeaways:

  • Inventory control involves forecasting demand, determining optimal inventory levels, and setting reorder points to ensure that stock levels are neither too high nor too low.
  • Tracking inventory levels in real-time to know exactly how much stock is on hand, in transit, or in production.

Types of Inventory Control

1. Perpetual Inventory System

The Perpetual Inventory System is a highly detailed and efficient approach to managing inventory that operates in real-time. This system continuously tracks every addition to or subtraction from inventory as transactions occur. It relies heavily on technology, using barcodes, RFID tags, and computerized inventory management systems to update stock levels instantly when sales or purchases are made.

Features

Advantages

Disadvantages

Example

A retail store uses a perpetual inventory system to track inventory in real-time. Each sale deducts items instantly, while purchases are added immediately. This ensures accurate stock levels are maintained continuously, enabling efficient management and timely reordering. The system facilitates better decision-making, reducing stockouts and optimizing inventory investment.

2. Periodic Inventory System

The Periodic Inventory System is a traditional method of inventory management where stock levels are updated and assessed at fixed intervals, such as weekly, monthly, or annually. This system does not track inventory transactions as they happen but rather relies on physical inventory counts to determine stock levels at specific times.

Features

Advantages

Disadvantages

Example

A small clothing boutique that uses Periodic Inventory Control. Every quarter, the staff closes the store for a day to physically count all merchandise, from dresses to accessories. They record these counts in their inventory system to adjust for any discrepancies, such as unrecorded sales or damages, ensuring they have accurate stock information for the next few months until the next count.

3. Just-In-Time (JIT) Inventory System

Just-In-Time Inventory is a streamlined approach to inventory management that aims to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, and not before. This system is highly coordinated, requiring precise timing and reliable suppliers to ensure that components arrive just in time to enter the manufacturing process without the need for significant storage time.

Features

Advantages

Disadvantages

Example

Consider a car manufacturer that uses Just-In-Time (JIT) Inventory. They coordinate closely with their suppliers to ensure that components, like seats, electronics, and tires arrive exactly when needed on the production line. This method eliminates the need for large storage areas and reduces holding costs, as parts are used immediately in assembly, ensuring a streamlined and cost-effective production process

Conclusion

In conclusion, mastering the Types of Inventory Control is essential for any business looking to streamline operations and enhance efficiency. Whether you choose a Perpetual Inventory System for real-time data, the simplicity of a Periodic Inventory System, or the precision of Just-In-Time (JIT) delivery, each method offers unique benefits and challenges.

Types of Inventory Control – FAQs

What are types of inventory control?

The 3 types of Inventory control are ,

  • Periodic Inventory Control System
  • Perpetual Inventory Control System
  • Just-in-time (JIT).

What is the difference between perpetual and periodic inventory systems?

Perpetual inventory systems continuously track inventory levels in real-time, while periodic inventory systems involve manually counting and reconciling inventory at specific intervals.

How does Just-In-Time (JIT) inventory control work?

JIT inventory control aims to minimize inventory holding costs by receiving goods from suppliers exactly when they are needed in production or for sale, reducing the need for excess inventory storage.


Article Tags :