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Guide to inventory management and stock control

Business process

Guide to inventory management and stock control

Man doing stock control
‘Stock’ is a word that retail and manufacturing companies use to describe the goods they currently hold that they plan to sell to customers.

Inventory management and stock control are interrelated activities that ensure your stock is effectively organised.

In this article, you’ll learn about the key concepts of stock management and inventory types. You’ll also get guidance on inventory management for small businesses.

What is inventory management?

Inventory, or stock management is a process that ensures you have the right amount of stock, in the right place, at the right time. It involves understanding your customers’ buying patterns and meeting demand, without over- or under-stocking.

Let’s say you run a supermarket chain without an efficient stock management process. You might find that you have more chicken in stock than you can sell. Or not enough rice. This could persuade your customers to go to your competitors instead.

Inventory management is also about planning for fluctuations in demand. For example, ensuring you have extra food available in the run-up to the holidays.

What is inventory control?

Inventory control involves knowing where your goods are at any time. It helps you make the best decisions about how you organise and distribute stock.

Efficient stock control means you can find any product, whenever you need it.

Take our supermarket example again. A good stock control process makes it easier for the store to respond to changes in demand, like selling out of soft drinks during one hot morning. With good grasp of stock control, the store would have sent a driver to get more stock from the warehouse, before the existing stock ran out.

Types of inventory

Different industries have different inventory types. Inventory management is often thought of in relation to retail and manufacturing. But there are various types of inventory that relate to logistics, catering, and even some service organisations.

Here are the main inventory types that your business may need to manage:

  • Merchandise

For retailers, merchandise inventory means knowing how much of every product you hold.

  • Raw material

Manufacturers should monitor the quantity and value of raw materials they hold.

  • Work in process

Manufacturers want to find out how much stock is being processed or assembled.

  • Transit inventory

It can take days to move your stock to poorly connected or remote areas. A transit inventory helps you monitor how much of your assets are currently in transit.

  • Maintenance, repair, and operations goods

If you offer a repair or maintenance service, an MRO inventory lets you know how much stock you hold.

What is the best inventory valuation model for your business?

Inventory valuation helps you work out the monetary value of the stock you hold. It is also essential for accounting purposes. There are two main types of inventory valuation models: periodic and perpetual valuation.

  • Periodic valuation

This is an easier option for smaller businesses or those that sell a limited range of stock. With periodic inventory, goods are recorded as you sell them, but your inventory is not updated. Instead, you do a physical stock count every month, quarter, or year, which you then match up against what you’ve sold.

  • Perpetual valuation

Better suited to larger organisations, a perpetual valuation uses inventory management software to automatically update the inventory list after every sale.

What is an inventory management system?

An inventory management system is a comprehensive solution for your business’s stock control and inventory management needs. It makes your processes around stock management more efficient and helps you make better stock decisions.

Many companies use customised inventory management software. This helps them prepare for changing demand based on their specific circumstances.

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Comments (4)

  • Hi There,

    I have a problem with the inventory and need urgent help please. We have now for years used an open item code on the system for items that didnt form part of the inventory normally. I have subsequently figured out that there is a huge problem with the GPs and costings as a result. How do I bypass the inventory’s figures when drawing a income statement or Trial balance.

    Please assist

    • Thanks for your comment, Francois. I have passed on your details (email address) to our support team to get in touch with you.

  • Hello
    our company uses Pastel. I’d like to draw up a simple process/ procedure for weekly cycle counts. Please assist with a format/ template.


  • would this software be able to run live stock controls by product for a restaurant. In other words, does it have the ability to understand which ingredients and volumes are used for a particular product sold, i.e a beef burger that has pickles, tomato, relish, patty and a bun?
    Therfore, if I sell one hamburger, can it update the individual ingredient quantities left in stock?