Inventory control vs inventory management: What you need to know

As an ecommerce business, stock is your lifeblood. No matter how well you build your brand or how successful your demand generation campaigns are, you’ll only be profitable and able to grow if you learn how to optimise your inventory—meaning you have enough of the products your customers want without being overstocked. 

Inventory control and inventory management are both crucial concepts for the efficient operation of ecommerce businesses. While they may sound similar, each plays a unique role in ensuring you always have just the right amount of stock on hand. 

In this article, you’ll learn: 

• What inventory control is and what inventory control systems do.
• What inventory management is and what inventory management systems do.
• The similarities and differences between inventory control vs inventory management.

What is inventory control

Inventory control refers to the process of monitoring existing stock levels, often across various warehouses and locations. The main goal of inventory control is to maximise efficiency by minimising the cost of holding inventory while ensuring that stock is available when needed.

Effective inventory control isn’t just about knowing what is in stock but also managing it in a way that aligns with your business's operational and financial goals. This process involves a variety of tools and techniques designed to keep track of stock from the moment it enters your warehouse to when it’s shipped to a customer. 

Key elements of inventory control 

• Stock monitoring: Continuously tracking the quantity and condition of stock, ensuring items are well-stocked and identifying which are under or overstocked.

• Reorder points: Determining the minimum quantity of an item that triggers a reorder, which is crucial for avoiding stockouts and overstock situations.

• Inventory audits: Regular checks to ensure the physical stock matches the recorded inventory, helping to identify discrepancies and issues like theft or damage.

What inventory control systems do

Inventory control systems help you monitor current inventory levels and manage daily warehouse activities. Key functionalities of inventory control systems often include: 

• Real-time inventory tracking: This platform will automatically notify you when there is low stock, overstock or stock that’s about to expire. 

• Automated reordering: Inventory control systems automatically generate purchase orders when stock levels hit predetermined reorder points, ensuring continuous availability without manual effort.

• Barcoding and RFID tagging: These tools use technology like barcodes and RFID tags to track inventory movement and status in real-time, enhancing accuracy and reducing manual counting errors.

• Audits and reports: This software makes it easy to track inventory patterns and report the results, helping you make informed reorder decisions. 

What is inventory management?

Inventory management is a broader term that encompasses all aspects of managing a company's inventory, from purchasing to production to sales. It involves overseeing the flow of goods from manufacturers to warehouses and from these facilities to point of sale. The aim is to have the right inventory in the right quantity at the right place at the right time.

Inventory management directly impacts the financial health of your business. By integrating advanced technologies like AI and data analytics, you can better predict trends, manage resources and achieve the ideal balance between demand and supply.

Key elements of inventory management

• Demand forecasting: Using historical sales data to predict future demand, which helps you plan the quantities you need to meet customer demands without overstocking.

• Supply chain management: Coordinating the logistics of the supply chain to optimise the cost and efficiency of inventory movement and storage.

• Cost management: Minimising the costs associated with inventory, including purchase costs, carrying costs and shortage or stockout costs. 

What inventory management systems do

Inventory management software usually has more complex functionalities than inventory control systems, as they’re designed to give you greater visibility of your stock as it moves throughout the supply chain. Key functionalities of inventory management systems often include: 

• Integrated inventory planning and procurement: These systems help streamline the procurement processes, ensuring timely order placement and processing based on predictive analytics and demand forecasting.

• Order and return management: Inventory management software often goes beyond tracking stock and also helps you manage sales processes, from order fulfilment to return processing. 

• Advanced forecasting tools: Using complex algorithms and machine learning, these tools analyse past sales data and market trends to predict future demand more accurately, helping to prevent both surplus and shortage.

• Full-scale integrations: Inventory management systems often integrate with other business systems, like your CRM, ERP and accounting software, to provide a comprehensive view of business operations and facilitate strategic inventory planning.

Inventory control vs inventory management comparison

Inventory control and inventory management, while closely related and often overlapping, have distinct roles within a business’s supply chain strategy. Understanding their similarities and differences can help you use both systems effectively. 

Similarities

Both inventory control and inventory management:

• Focus on optimising inventory levels: Both aim to maintain the appropriate amount of inventory based on demand, reducing the costs associated with excess stock or stockouts.

• Use specialised technology: Both systems leverage technology to track and manage inventory more efficiently and accurately.

• Contribute to customer satisfaction: By ensuring that products are available when needed, both systems help maintain and increase customer satisfaction and loyalty.

• Help you optimise cash flow and profit margins: Since both these approaches are aimed at optimising stock, they help you avoid overstocking and tying up your cash flow in unnecessary inventory. 

Differences 

The main differences between inventory control and inventory management include:

• Scope of management: Inventory control is more focused on the day-to-day management of stock levels and maintaining balance within the warehouse. Inventory management, on the other hand, deals with broader strategies that encompass production, sourcing and the full supply chain.

• Strategic vs. operational: Inventory management is strategic, focusing on the bigger picture and integrating with other business operations for overall efficiency. Inventory control is more operational, dealing with immediate concerns and details of stock management.

• Complexity: While both use similar tools, inventory management systems are generally more complex and incorporate a wider range of features like demand forecasting, full-scale integration with other business systems and multi-location management.

• Use cases: SMBs with straightforward inventory needs might find inventory control systems sufficient for managing day-to-day stock levels effectively. However, larger businesses, especially those with complex supply chains involving multiple products and locations, will benefit more from comprehensive inventory management systems that provide more strategic insights.

Tips for managing and controlling inventory

Both controlling and managing stock have their place in an overarching inventory optimisation strategy. Here are a few best practices for optimising inventory that can help you ensure you always have the stock you need without unnecessarily tying up your capital. 

Research different inventory control methods to discover which is best for your business

There’s no one-size-fits-all approach to tracking and controlling stock, and which method makes the most sense for your business depends on what industry you operate in, how large your company is and what kind of product you sell. A few common inventory management methods include: 

• Just-in-time (JIT): This strategy involves keeping inventory levels as low as possible, ordering only what is needed to meet immediate demand. While it minimises excess inventory, JIT is susceptible to disruptions in the supply chain, which can pose challenges for implementation.

• First-in-first-out (FIFO): FIFO is ideal for businesses dealing with perishable items like food or cosmetics. It prioritises the sale or use of older stock first, helping to reduce the risk of spoilage and waste.

• ABC analysis: This technique categorises inventory into three classes based on their value and impact on total inventory costs: high-value items (A), medium-value items (B) and low-value items (C). 

• Economic order quantity (EOQ): EOQ is a calculation used to determine the most cost-effective amount of stock to order at one time. It aims to balance ordering and holding costs by optimising the frequency and size of orders, in turn avoiding both excessive inventory and frequent reordering.

Harness historical data to predict demand and order just the right amount of stock

While you can’t know exactly which purchasing trends your customers will display in the future, you can use historical sales data to make predictions and purchase your inventory more strategically. To do so, consider the following factors:

• Average units sold: Monitor the typical number of units sold during a specific period.
• Lead time: Assess the average time required to receive new stock after placing an order.
• Available capital: Determine the amount of cash on hand for new inventory purchases.

With this approach, you should also take into account seasonal fluctuations, like Black Friday sales, to effectively plan for those events in the future. Additionally, inventory management software can help you make these strategic decisions. 

The longer you manage inventory, the more data you accumulate, which facilitates more precise forecasting. But if you’re working with limited data, err on the side of caution. Ordering slightly more inventory can serve as a safety stock, helping you prevent stockouts that could lead to lost sales and frustrated customers.

Manage your cash flow wisely to ensure you always have enough capital to replenish stock

While it’s important to accurately forecast demand, you won’t be able to purchase the inventory you need if you don’t manage your cash flow wisely. That’s why it’s so important to practise cash flow forecasting, which helps ensure you have the financial resources needed to increase orders with suppliers ahead of peak demand periods. 

There are specialised tools that can help you manage your cash flow wisely and even give opportunities to extend your runway. Juni, for example, comes with spend management features, like a real-time expense overview that pulls data from your bank feeds, credit card transactions and other accounts. 

Juni also offers inventory financing options that help you free up your cash flow and ensure you always have cash on hand to replenish stock.* You can access up to 20 million EUR with up to 120 days to pay, giving you the flexibility you need to optimise your inventory management. 

Effectively control and manage inventory to grow your business 

Inventory control and inventory management are similar processes that both have the end goal of helping businesses optimise stock so they always have the products they need on hand without letting unused items gather dust in warehouses. 

While inventory control is more focused on the day-to-day tracking of existing stock, inventory management encompasses an overarching goal of optimising the supply chain, using analytics to help you make strategic decisions when it comes to replenishing stock. 

These two processes, which encompass an overall inventory optimisation strategy, depend on your ability to optimise cash flow and ensure you’re never stuck without the capital you need to replenish stock. 

That’s where Juni can help: With access to fast and flexible financing, you can ease your cash flow to maintain good relationships with suppliers and ensure your customers can always order their favourite products.* 

‍*Juni Capital for cards is available for companies registered in UK, NL, SE, DE, FR, ES, IT, NO and FI, upon eligibility. Capital for invoices is available for companies registered in SE, DE, NL, FR, ES, IT, NO and FI, upon eligibility. Fees and terms and conditions apply. Click here for more details.