What is Stock Control? Definition, Methods & How To Improve

stock control
Photo by Anna Nekrashevich
Table of Contents Hide
  1. Definition of Stock Control
  2. Different Stock Control Management Methods 
    1. #1. Stock Analysis
    2. #2. Reordering at a Set Time or Level
    3. #3. Just in Time (Jit) Management
    4. #4. EOQ (Economic Order Quantity)
    5. #5. First Out, First In
    6. #6. Control of Batches
    7. #7. Vendor-Managed Investigation (VMI)
  3. Implementing a Stock Control System
    1. #1. Inventory Management Needs and Objectives
    2. #2. Choosing an Appropriate Stock Control System or Software for Small Business Requirements
    3. #3. Stock Control System Integration with Other Business Systems and Processes
  4. How Can My Company Avoid Overspending or Underspending on Stock?
    1. #1. Definition of Processes and Stock Types
    2. #2. Implement Inventory Management Software
    3. #3. Investigate Integrated Technology
    4. #4. Sale of Tracks
    5. #5. Stock Protection
    6. #6. Apply Effective Stock Management to Your Business Model
  5. Advantages of an Effective Stock Control System
    1. #1. Inventory Accuracy Improved and Stockouts Reduced
    2. #2. Savings From Optimised Stock Levels and Lower Carrying Costs
    3. #3. Increased Customer Satisfaction and Efficiency in Fulfilment
  6. The Procedure for Ordering Stock
    1. #1. Use a Single Inventory Control System
    2. #2. Examine the Current Inventory
    3. #3. Establish Your Desired Stock Levels
    4. #4. Review Inventory Control Regularly
  7. Stock Control Software for a Small Business
  8. What Are the Five Stock Control Principles?
  9. What Is the Most Secure Stock Control Method?
  10. What Are the Stock Control Golden Rules?
  11. How Frequently Should Stock Be Controlled?
  12. What Information Should Be Included on a Stocktake Sheet?
  13. Conclusion
  14. Related Articles
  15. References
    1. Related

The success of large or small business owners depends on stock control systems or software. Overstocking can lead to insufficient liquidity, while understocking might make meeting your customers’ requests unfeasible. Stock is how your company produces money and continues in business, so failing to keep it under control can have major consequences. 

In this post, we will look at the different methods of stock control and how your company can avoid overspending or underspending on stock by implementing a stock control system. The advantages of an effective stock control system and stock control software for a small business

Definition of Stock Control

Stock control is the system of keeping stock within a business within established limits to meet consumer demand while minimising the dangers of overstocking. Effective stock control strives to reduce inventory holding costs while maintaining sufficient available stock to meet consumer demand.

While stock control is simple in theory, it requires experience, time, and instruments in practise. Stock control, also known as inventory control, entails keeping each product line within its minimum and maximum levels so that the business can fulfil orders without delay while keeping stock-holding costs to a minimum.

Different Stock Control Management Methods 

Here are some of the several strategies, both tried and tested and novel, for managing your stock levels for the type of business you own.

#1. Stock Analysis

If fresh stock needs to be ordered, your business will conduct regular stock checks. This takes into account pre-determined data that assists business management in deciding whether to order fresh stock or wait. Many firms have a minimum stock level, the lowest point at which stock can be sold before additional stock is ordered.

#2. Reordering at a Set Time or Level

This entails ordering new stock at predetermined periods, levels, or both. A corporation, for example, might have a standing order for 500 units every third Sunday of the month. This sort of stock control is especially useful for businesses with permanent contracts and stable demand, while intermittent irregular orders, unless placed with a long-term delivery date, are ineffective.

#3. Just in Time (Jit) Management

This stock control system was developed in Japan. To keep costs down and liquidity high, stock is ordered as needed. The improved cash flow, however, comes at a cost. The organisation must be extraordinarily organised to ensure that orders are made on time, and suppliers must be dependable to meet needs. There is also the possibility of running out of stock if a large order is placed.

#4. EOQ (Economic Order Quantity)

Depending on the sort of organisation and the industry in which it operates, EOQ is a complex mathematical formula that seeks to keep stock at an ideal level. Because EOQ calculations can be time-consuming, you may find it easier to consult a specialist or invest in stock management software that can generate EOQ calculators out of the box. When necessary, EOQ can be integrated with other techniques of stock management.

#5. First Out, First In

This system is common among businesses that handle perishable stock. Its goal is to keep stock from deteriorating before it is used. Before receiving additional stock, the manufacturing process moves on to the next step in identifying the stock by its receipt date.

#6. Control of Batches

Batch control divides stock management and manufacturing into batches. This decreases the complexity of the manufacturing process and aids in meeting short-term goals. Batch control can also help organisations save money by requiring only the raw materials and components required to meet the demands of a single batch.

#7. Vendor-Managed Investigation (VMI)

Vendor-managed inventory (VMI) is a newer stock management concept that emphasises shared risk between customer and supplier. The customer informs the supplier of their stock requirements; the supplier is then responsible for keeping a certain level of stock at a particular location, which is often the buyer’s point of sale. VMI decreases the likelihood of understocking and the amount of time stock spends in the supply chain.

Implementing a Stock Control System

Let’s look at creating a stock control system now that you’ve learned enough about stock control methods. It is mostly based on the three critical phases outlined below:

#1. Inventory Management Needs and Objectives

The first stage is to examine the statistical data you anticipate from your inventory management system, as well as your associated goals and requirements. Examine your present inventory situation, gaps, consumer expectations, and turnover rate. After you’ve assessed your requirements, you can implement a variety of productivity-boosting tactics. All of this information can also be used to select the best stock control system.

#2. Choosing an Appropriate Stock Control System or Software for Small Business Requirements

Evaluating needs and goals aids in deciding on a stock control system. Cost and budget, customizations, business size, customer support, security, flexibility, real-time tracking, business objectives, and system support are all variables to consider when selecting one. In brief, it takes careful consideration, and it is best to seek the advice of expert inventory managers.

#3. Stock Control System Integration with Other Business Systems and Processes

You must link the control system with other business systems and procedures for it to perform properly. This way, different business sectors may better communicate to decrease manual errors and promote educated purchasing decisions based on up-to-date inventory information. Another advantage of this integration is the seamless flow of data between business divisions and software systems.

How Can My Company Avoid Overspending or Underspending on Stock?

Here are some pointers on how to manage your inventory effectively for better profitability, as well as how to avoid underspending or overspending on stock.

#1. Definition of Processes and Stock Types

It is critical to carefully define the processes involved in manufacturing and the types of stock required to guarantee that your business maintains suitable levels of stock at the proper times. Stock can be divided into four categories:

  • Raw materials: components utilised in the creation of new items
  • Unfinished goods: materials in the process of being turned into final goods
  • Finished goods: things that are ready for sale in the market
  • Consumables are extra resources used in the manufacturing process, such as fuels and gas canisters

#2. Implement Inventory Management Software

Inventory management software gives you complete control over your stock and supplies by merging associated activities into a centralised software package. As your business runs, the software can alert you to take action, such as ordering additional products, when your stock reaches a certain level. This can assist you in making data-driven decisions to avoid overstocking.

#3. Investigate Integrated Technology

Inventory management software isn’t the only technology that can assist your business with stock management. Mobile scanners and POS (point of sale) systems can also be useful. Prioritise systems that work together when investing in technology. A POS system that is incompatible with your inventory management software might waste both time and money. Manually transferring data across systems may also result in mistakes.

#4. Sale of Tracks

In addition to totaling sales at the end of the day, it is useful to know what things were sold, how many were sold, and to update the business’s inventory totals. Then, devote some time to analysing this data and asking some critical questions: 

  • When do particular things sell faster or less quickly? 
  • Is this a seasonal occurrence? 
  • Do you sell certain things on a given day of the week? 
  • Do some goods always sell together? 

Understanding your sales totals and the big picture of how things look is critical for maintaining inventory control.

#5. Stock Protection

Damage and theft can have an impact not only on stock levels but also on your financial line. Stock should be delivered to and stored in a safe location, preferably with CCTV or equivalent security. Staff should be trained to follow certain safety protocols to protect stock, such as recognising distraction burglaries and reporting security problems to higher management.

Firms may also be interested in learning about the security measures taken by suppliers; a damaged or stolen pallet of stock could mean the difference between completing an order and disappointing an important customer.

#6. Apply Effective Stock Management to Your Business Model

There is no ‘one-size-fits-all’ stock management solution. Depending on the sort of organisation and the industry in which it works, a variety of approaches are regularly utilised in business. Choose the one that best suits your business.

Advantages of an Effective Stock Control System

In this section of the text, we will concentrate on the advantages of proper stock control. Though there are many, we have highlighted the most significant ones; let’s have a look!

#1. Inventory Accuracy Improved and Stockouts Reduced

One of the most serious issues that most firms experience is that their products run out of stock and they are unaware of the statistics. This prompts buyers to make hasty purchasing decisions to avoid being disappointed. Businesses can gain insight into how much stock is held in the warehouse through good stock control. This, in turn, helps to reduce stockouts because you will undoubtedly refill out-of-stock products on time.

#2. Savings From Optimised Stock Levels and Lower Carrying Costs

Saving money in business is closely related to preventing overstocking and understocking. Overstocked items may take longer to sell and may even expire in most situations, whereas understocked items will require you to make a speedy purchase regardless of price. When a product is out of stock, your main concern is to replenish it as soon as possible. Both issues can be avoided with proper stock management. Carrying costs, specifically stock management and handling costs, insurance, and loss if products expire, can also be decreased.

#3. Increased Customer Satisfaction and Efficiency in Fulfilment

With effective stock control, there is no need to disappoint any customer when things are out of stock. Integration of a stock control system also helps in this area, as a business may fulfil more orders rapidly, improving sales turnover. Furthermore, it helps reduce the chance of clients becoming irritated while waiting for their orders to be processed. In short, all of these elements help you gain your customer’s trust and entice them to return.

The Procedure for Ordering Stock

The stock ordering procedure is a critical component of effective stock control. It is advised that, when checking your stock ordering, you:

#1. Use a Single Inventory Control System

It is critical to choose what form of inventory system will best suit your business from the start. Periodic systems or perpetual systems are the two possibilities, with the latter being highly recommended for accuracy and ease of use.

#2. Examine the Current Inventory

You must assess your inventory and its value, including completed goods and raw resources. Examine your sales statistics to determine which items are best sellers, which have the highest gross margins, and which are slow-moving and old.

#3. Establish Your Desired Stock Levels

You must now identify the stock you usually require and calculate your maximum and minimum stock levels for each item; you must also determine the minimum re-order level for each item. It’s easier to know what you have to work with once you’ve established the criteria. You’ll also need to keep correct stock records and do a stocktake to ensure they match what you have on hand.

#4. Review Inventory Control Regularly

Stock management impacts other business elements. Note: 

  • Inventory metrics are tracked. The stock turn rate shows how well your method is operating.
  • Checking your purchases’ sales history and demand estimates should guide purchases.
  • Ordering less stock more often. It can boost liquidity but lower sales.
  • Consider marketing and promotion. Before launching a sales promotion, ensure you have enough stock to meet demand.
  • A backup strategy for poor product sales Know how to quickly dispose of extra stock, whether you donate or return it to suppliers.
  • Please evaluate your sales policies. Your sales team can strategically sell fast-moving items and clear slow-movers.
  • Store your stuff better. Best practise requires good warehousing. Putting slow-moving commodities in the back of the warehouse and fast-moving goods in the front makes picking and packing easier.

There are numerous other stock control factors. Start with a professional inventory management software system for excellent stock control in your small business.

Stock Control Software for a Small Business

Now that you know what to look for in a stock control system, you must determine which stock control software is appropriate for your small business. Choosing a system with the features you require most will help you achieve effective stock control. Talk to the right people in your business and make a list of the features you want.

The following are some useful features of stock control software for a small business:

  • Possibility of using several currencies
  • Capability to cover several warehouses
  • Can adapt to the growth of your business?
  • Serial/Batch monitoring
  • Support several users at the same time

What Are the Five Stock Control Principles?

Inventory management is based on five fundamental principles:

predicting demand,

  • flow in the warehouse
  • Inventory turnover
  • stock rotation
  • cycle counting as well
  • Process inspection.

What Is the Most Secure Stock Control Method?

Choose a provider who understands your business demands and delivers on schedule with stock. Check the stock before placing an order. Check that the stock is clean and not damaged; for example, throw away any punctured vacuum packs, swelling packs, or badly dented cans, and ensure that bottle and jar tops are secure and seals are intact.

What Are the Stock Control Golden Rules?

The golden rule of stock control is to get the quantity and frequency of re-stocking activities right while keeping costs as low as feasible while maintaining profitability and growth.

How Frequently Should Stock Be Controlled?

You must undertake stocktaking at least once a year to ensure that all stock in your business is counted at least once a year. However, depending on the demands of your business, you may undertake stocktaking more frequently than once a year, such as daily, weekly, monthly, or quarterly.

What Information Should Be Included on a Stocktake Sheet?

The stocktake sheets list the items in bin order, followed by a short name order. Expected stock quantities might be included on the stocktake sheets if desired. The location (bin): This shows a list of all the bins in the specified warehouse.  


To summarize, stock management is a critical need for any business that delivers numerous benefits and a more professional approach to client dealing. Whatever stock control approach is ideal for you, you may reap the most benefits by correctly executing it. Controlling stock may appear to be a moving target, but having the correct assistance, technology, and resources can help you make smarter decisions when ordering and stocking inventory.


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