Stock Control: Meaning, Procedure and Best Practices

In a world full of inventory management challenges, picking the most significant one can be tricky. 

But the Digital Inventory Report 2022 spills the beans. It reveals that 44% of businesses grapple with the dynamic duo of inventory headaches—overstocking and understocking.

For eCommerce retailers, the nightmare scenario is not having optimal inventory. And rightfully so. It leads to lost sales, takes a toll on profits, and damages customer relationships. 

A study from 2023 by the IHL Group found that inventory issues, like stockouts and overstocks, are set to cost retailers a whopping $1.8 trillion. To put it in perspective, that's as much as the entire GDP of Brazil!

You need robust stock control procedures in place to steer clear of this. However, keeping tabs on your stock, especially as it constantly moves within the retail supply chain, is no small feat.

The good news? There are plenty of smart strategies to make informed decisions about stock control. These strategies enhance your ability to effectively manage your eCommerce supply chain and consistently meet customer demand.

PACK & SEND is here with your go-to resource for understanding stock control. We'll break down what stock control is, explore different types, highlight its significance, and discuss the challenges that come with stock control systems.  

Let's get down to business!

What is Stock Control?

Stock control, or inventory control, is managing inventory levels within a company's warehouse. It monitors the movement and storage of stock in warehouses, helping businesses ensure they always have enough stock in good shape. 

At its core, stock control is about finding the right balance between what's available and what's needed. The aim is to have enough products to meet customer needs without having too much stock that ties up money and space. 

Done right, stock control becomes a game-changer. Effective stock control methods can cut logistics costs while ensuring you've got the optimal amount of stock stored. 

Wait, does that sound like inventory management? While stock control and inventory management are closely linked, they serve different purposes.

But the most basic difference is this. Stock control methods monitor and regulate existing stock in a warehouse. Inventory management involves the overall movement of goods across supply chains, with inventory forecasting as its fundamental element. 

Here's a quick breakdown of the differences between stock control and inventory management—

Stock Control vs. Inventory Management

In a nutshell, 

Inventory Control—

• Monitors the flow of inventory within the warehouse.

• Tracks the quantity, condition, and status of items.

Inventory Management—

• Encompasses the entire process from forecasting demand to order placement.

• Focuses on future customer preferences and adjusts orders accordingly.

Similarities Between Stock Control and Inventory Management

It is not to say that stock control and inventory management do not share any similarities. They do.

First, both stock control and inventory management track and manage stock.  Stock control, a component of the broader management process, monitors daily trends for individual items. Meanwhile, inventory management looks at bigger trends over more extended periods. 

Secondly, both processes use mobile devices for barcodes and RFID for inventory scans in real time. 

Finally, they both help you know what to market to your customers and whether there's a product you should stop offering.

Now that you're familiar with inventory control, let's dive into why it benefits your retail store.

Why is Stock Control Important?

For online and retail shops, proper stock control has several perks, including:

1. Minimise Obsolete Stock 

Managing obsolete inventory can be time-consuming and resource-intensive, taking away from essential business tasks. For some retailers, allocating more resources to identify, manage, and dispose of unsellable items is a tall order.  

Precise stock control helps cut the risk of having perishable or obsolete inventory. This not only makes your business more sustainable but also allocates resources efficiently.

2. Quality Assurance

A solid stock control system is about more than just keeping tabs on items. It also comes with the fringe benefit of enhancing quality control. 

When you can oversee every aspect of your stock, you naturally have better control over its quality. What's more, stock control methods let you gauge the stock quality from suppliers. 

This way, keeping a close watch on how products move through your inventory helps identify issues, such as frequent returns due to breakages or defects.

3. Cost Savings

For product-based businesses, inventory makes up a substantial portion of current assets. A significant part of working capital is used by it. 

Efficient stock control helps cut costs associated with excess inventory purchases and inadequate stock levels. Optimising stock levels frees up funds for expansion or increased profits.

4. Customer Satisfaction

Incorrect stock count is an easy way to lose customers. It causes stockouts and unfulfilled orders, leading to customer disappointment. In 2023, US and Canadian retailers lost about $350 billion in potential sales due to stockouts.

Stock control helps you keep the correct stock levels, leading to:

• Informed inventory management decisions

• Timely order completion

• Lesser customer complaints 

• Satisfied customers

This, in return, nurtures customer loyalty and enhances positive brand perception.

5. Accurate Bookkeeping

Having precise inventory records is invaluable for managing assets and auditing. Complying with financial rules and tax regulations may require a physical inventory account. 

Stock control is an excellent tool for ensuring correct numbers and pricing for all your stock in inventory management systems and accounting software. Plus, it helps you identify spoilage and understand your company's value. So that your company can undergo inventory audits with confidence.

What are the Methods of Stock Control?

Now, let's take a closer look at some of the most popular methods used for controlling stocks in eCommerce. 

First In, First Out (FIFO)

FIFO is a popular method of inventory accounting and valuation. 

The principle is simple: the products acquired first are the ones sold or used first. So, when a customer makes a purchase, the older inventory will be shipped ahead of the older stock. 

FIFO is an easy way to control stock inventory and calculate its value. When assessing the worth of remaining stock, FIFO considers the natural flow of products through your supply chain.

Think of it like a line: the first ones in (oldest inventory) are the first ones out. This is especially useful when prices increase because the new stock usually costs more than the older items.

FIFO is commonly used in perishable goods industries like grocery stores to track expiration dates. Non-perishable sectors like clothing stores also use FIFO to ensure selling older inventory before the arrival of newer items.

Pros: 

• The newest items are served first, ensuring popular products are always available.

• Cuts down on outdated products lingering on shelves, reducing waste.

• Help maintain enough products on hand to meet demand while maintaining better control over the associated costs. 

Just-in-Time (JIT)

Just-in-time (JIT) is a stock control method where businesses receive inventory precisely when they need them—never more than necessary to fulfil existing orders. 

This approach avoids the risk of ordering excess and ending up with dead stock. Yet, it also means placing orders quickly to fulfil the next batch of orders. 

Hence, partnering with an experienced supplier is critical. They help set up essential systems, ensuring your business runs smoothly. 

Also, to make JIT work for your online business, you need two key capabilities: inventory forecasting and access to real-time stock levels. 

Pros:

• Cuts wasteful spending on storage space and equipment for excess stock.

• Enables faster delivery times for customers.

• Decreases costs linked to lost sales from out-of-stock items.

• Allows more frequent and accurate stock-taking, identifying potential product range issues sooner.

Economic Order Quantity (EOQ)

EOQ refers to the perfect product quantity a business should purchase per order. The objective is maintaining an efficient retail supply chain while minimising holding costs and optimising warehousing space.

Pros: 

• Acts as an important cash flow tool and helps keep your cash wisely invested in the right balance of inventory.

• Rather than relying on intuition, EOQ allows businesses to quantify their orders based on essential cost factors, promoting efficient and precise ordering.

ABC Analysis

ABC analysis categories your stock based on its value to your business.  

The idea is simple: some stock is more valuable than others. Therefore, it suggests allocating more resources to track and manage "strong" items and minimise the attention given to "weak" items. 

It classifies the inventory into three groups. "A" items are the most important. The following important are "B". And "C" items are deemed the least important. 

This helps brands identify high-demand products, thus optimising stock levels, even in limited warehouse space. 

Exploring 2 Main Types of Stock Control Systems

A stock control system is a technology solution that tracks a company's stock across the supply chain. It streamlines processes like purchasing, shipping, and warehousing into one system. 

The best system automates tasks, giving a clear view of your inventory and prompting timely reorders to maintain optimal stock levels.

Before digitisation entered inventory management, less advanced stock control methods were common among eCommerce retailers. Manual data entry, Excel spreadsheets, and Stock cards, to name a few. While these methods might suffice for smaller businesses, expect more errors, longer hours, and inefficiencies.

With AI tools and machine learning adding more automation to stock control systems, there are now more sophisticated stock control systems. 

The two main types of stock control systems are perpetual and periodic inventory systems.

1. Perpetual Inventory System

A perpetual inventory system continuously records inventory changes in real-time. 

When a product is sold, the stock controller scans its barcode. And the perpetual stock control system will immediately subtract it from the global inventory. 

Similarly, when received, a scanned barcode adds the product to the current stock levels. It thereby removes the need for the physical inventory check. 

The system uses technology like barcodes and Radio frequency identification tags for inventory tracking. Upon scanning, the details automatically go into a central database, easily accessible to warehouse managers.

A perpetual stock control system looks closely at inventory changes to instantly show how much stock is available on hand. This can help you a big way to ensure timely order fulfilment.

2. Periodic Inventory System

Periodic stock control system conducts periodic physical counts at specific intervals. Typically, at the beginning and end of a designated period. It means, you do physical counts to find the inventory quantity at the start and end of a specific timeframe.

If you are a small eCommerce business dealing with limited inventory quantities, the periodic stock control system is a budget-friendly way to manage stock levels. It doesn't demand regular processes, sophisticated software, or additional personnel, making it suitable for businesses with lower sales volumes.

But there are drawbacks, too. 

Businesses only discover their product quantities after a physical count. It causes issues when fulfilling orders, as the accurate stock count was established weeks or months ago. When a customer places an order, businesses must physically check their inventory to ensure availability.

Also, manual stock counting is time-consuming and labour-intensive. Each SKU must be individually counted, often requiring a pause in regular business activities.

Top 6 Stock Control Best Practices

1. Opt for automation in your inventory management processes

It simplifies stock control, freeing you to focus on other aspects of your business. Additionally, automation eliminates the risk of human error, making it an essential practice for effective stock control.

2. Conduct regular inventory audits

Perform a complete physical inventory count at least once a year. Conduct periodic spot checks on fast-moving goods to align counts with software records. It will also help ensure that the software captures stock data accurately. 

Implement regular cycle counting to distribute inventory checks across the year. Focus on high-value products for more frequent checks. Finally, work with your IT team to maintain system data flow and accuracy. 

3. Optimise purchasing procedures

Make informed purchasing decisions using data and forecasting. Regularly monitor customer demand, eliminate obsolete stock, and adjust safety stock and reorder points for efficient inventory management.

4. Implement inventory scanning at various stages in your warehouse

Pick a stock control system that allows you to scan during goods receipt, stocking, order picking, and packing.

5. Use Consistent Labels

Stick to one labelling system for your inventory, be it SKUs, barcodes, or RFID. Consistent labelling simplifies your inventory management and ensures efficiency in tracking, whether across locations or throughout the supply chain.

6. Ensure your warehouse is efficiently organised

Ensure products are in their designated locations and labelled accurately. This prevents time wastage and ensures quick identification of damaged or missing items. 

Use automation tools, such as barcode scanners, to log and generate pick lists. Optimise layouts by placing popular items closer to packing stations and grouping frequently ordered products together. Proper storage for perishables is also essential. 

5 Common Challenges in Stock Control

Effective stock control is crucial for eCommerce businesses, yet it comes with challenges:

1. Inaccurate Forecasting

Predicting future demand is challenging due to market fluctuations, seasonal changes, and unexpected events.

2. Human Errors

Manual errors are inevitable, especially in tasks like matching vendor invoices with purchase orders, impacting accuracy.

3. Technological Challenges

Adopting new stock control technologies can be hindered by integration issues, software compatibility, and resistance to change.

4. Seasonal Demand Fluctuations

High-demand periods may lead to shortages, while low-demand times can result in overstocking.

5. Vendor Management 

Handling various suppliers with different demands and reliability levels can be complex. Efficient vendor management is crucial to overcome disruptions caused by late deliveries or order inaccuracies.

Take Control Over Your Stock 

Effective stock control is vital for any eCommerce business, big or small. It optimises cash flow and reduces the resources spent on inventory management. 

Automated stock control systems allow for real-time stock tracking, offering visibility and stock control. 

But to really get the most out of your stock control methods, get the right partner to back you up. 

Because understanding is one thing, implementation is another. Managing inventory gets tough as you grow. Plus, you may or may not have the resources to implement these recommendations.

So, if you lack the bandwidth to handle these tasks, now is the ideal time to talk to a 3PL partner like PACK & SEND. 

Outsourcing inventory management logistics to us helps optimise stock levels and cut warehousing costs. Our global fulfilment network, powered by advanced tools, ensures top-notch eCommerce order fulfilment. We can handle everything for you – from inventory control and handling to fulfilment and shipping.

Getting started with us is easy! Contact the PACK & SEND experts today!

Frequently Asked Questions (FAQs)

What are the methods of stock control?

Some standard stock control methods include FIFO, ABC analysis, Economic Order Quantity (EOQ), Just-in-Time (JIT), and safety stock. 

What are the two types of stock control systems?

The two main types are periodic and perpetual. Periodic stock control system involves occasional manual counts. The perpetual stock control system provides real-time updates through continuous monitoring. Each system has its advantages. Perpetual offers better accuracy and control, while periodic is more straightforward and suitable for smaller businesses. 

Why is stock control important?

Stock control is crucial for—

• Maintaining an efficient supply chain

• Preventing shortages

• Optimising customer service

• Reducing waste, and 

• Saving on inventory costs

How often should I conduct inventory audits?

Conduct a comprehensive annual audit, preferably during tax season. Consider auditing every two to three months for larger inventories or businesses with numerous SKUs.

What is the safety stock level?

Safety stock level is the minimum quantity of stock a company keeps on hand to avoid running out of products due to unexpected events like high demand or supply chain issues. It acts as a buffer to prevent stockouts and ensure consistent order fulfilment.