BusinessInventory Control Systems Explained

Inventory Control Systems Explained


There are many different types of inventory control systems. Cycle counting, FIFO, LIFO, EOQ, and EOQ-P will all help you determine which ones are most appropriate for your business. These systems can also be used to determine how much to stock in each location and which ones are surplus. Learn more about these types of systems in this article. Listed below are some examples of how these systems can help you. Here is a brief description of each type of inventory control system:

Cycle counting

Cycle counting in inventory control refers to the process of periodically checking inventory levels and making adjustments. The technique involves analyzing the amount of inventory on hand, focusing on the most frequently used inventory, such as a product or service, where a shortage would be disruptive. Another method is physical area counting, which involves counting the number of items in a physical area, such as a department, floor, racks, or cabinets. Random counting, on the other hand, selects SKUs at random.


FIFO stands for first-in, first-out. The FIFO method makes it easy to keep track of inventory values and predict gross profit. Many inventory management software solutions help businesses keep track of their inventory, which makes FIFO an ideal choice for smaller companies and non-US operations. FIFO also has some significant advantages. Let’s look at some of them:


In inventory control, there are many benefits of FIFO versus LIFO. FIFO prioritizes the sale of the most recent inventory, while LIFO places greater emphasis on the aging of older items. Because the aging of inventory is not considered “sold,” a company can report a lower after-tax balance for this type of inventory. LIFO is best suited for industries where stock is continuously changing and which can’t afford to leave unsold items on the shelf for long.


When you use EOQ in inventory control, you can be sure that you are not overordering or under-ordering, which can increase your costs. EOQ assumes that your purchasing costs remain constant, and that the demand for the items in your inventory never changes. It also assumes that there is no risk of stockouts. Using EOQ in inventory control will help you determine how much inventory to order over a certain time frame.

Periodic inventory

A periodic inventory control system is suitable for small businesses because it does not require complex accounting skills. This system records changes in inventory through simple calculations. It is also a manual system, so no business owner should be burdened with complex accounting software or the hassle of maintaining a daily inventory journal. Most businesses today use a perpetual inventory system. It is the ideal solution for most small businesses. But is it right for your company? Let’s take a look at some pros and cons of periodic inventory control.

Real-time tracking

Using real-time tracking in inventory control helps warehouse managers anticipate changes in inventory and ensure consistent customer service. It can show seasonal trends, market demand, and popular items. Real-time tracking also allows warehouse managers to apply cost information to individual activities. They can also drill down to see additional information. This information is vital for effective inventory valuation. As a result, real-time inventory control can help warehouse managers eliminate the need for physical inventory counts.

Developing SOPs

Developing SOPs for inventory control is an excellent way to standardize the process for inventory management. By following standardized procedures, organizations can eliminate waste. Effective leadership avoids reinventing the wheel every Monday. To create an efficient work environment, managers break routine procedures into simple steps. Work instructions are common in many industries, including manufacturing, warehouses, government institutions, fleet management, and hospitality. SOPs help to improve productivity, increase job satisfaction, and maximize efficiency.

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