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Stock control and inventory

Inventory control, also known as inventory control, is used to show how big your inventory is at a certain time and how to track it.

It applies to any item you use to make a product or provide a service, from raw materials to finished goods. This covers inventory at every stage of the production process, from purchasing and delivery to use and replenishment of inventory.

Effective inventory control allows you to have the right amount of inventory in the right place at the right time. This ensures that capital is not tied up unnecessarily and protects production if problems arise with the supply chain.

This guide explains different inventory control methods, shows you how to build one, and where to find more information.

Types of stocks

Everything you use to make your products, provide your services, and operate your business is in your inventory.

There are four main types of inventory:

  • raw materials and components – ready to use in production
  • work in progress – inventories of unfinished goods in production
  • finished goods ready for sale
  • consumables – for example, fuel and stationery

The type of inventory can influence how much you need to keep; see the page in this guide on how much inventory you need to keep. If you have small business then you can go for inventory software for small business.

Stock value

You can classify stocks in more detail, based on their value. For example, you could categorize items into low value, medium value, and high value categories. If your inventory levels are limited by capital, this will help you plan for spending on new and replacement inventory.

You can choose to focus resources on areas of greatest value.

However, low cost items can be crucial to your production process and should not be overlooked.

  • Maintain a large volume of stocks
  • Advantages disadvantages
  • Easy to manage Higher warehousing and insurance costs
  • Low management costs Some assets may perish
  • You’re never out of stock Inventories can go out of date before they are used up
  • Buying in bulk can be cheaper Your capital is tied up

This might be right for your business if sales are hard to predict (and it’s hard to assess how much inventory you need and when you will need it), if you can store a lot of inventory at low cost. costs, if the components or materials you are purchasing are unlikely to undergo rapid development or if it takes a long time to reorder them.

Inventory levels depend on the type of inventory

There are four main types of inventory:

Raw materials and components

Ask yourself a few key questions to help you decide how much inventory you should keep:

  • Is the supply reliable and are other sources available?
  • Are the components produced or delivered in batches?
  • Can you forecast the demand?
  • Is the price stable?
  • Do you get discounts if you buy in bulk?

Work in progress – inventories of unfinished goods

Maintaining inventory of unfinished goods can be a useful way to protect production in the event of down-line problems with other supplies.

Finished goods ready for sale

You might keep inventory of unfinished goods when:

  • demand is assured
  • goods are produced in batches
  • you are responding to an important order


For example, fuel and stationery and the amount of inventory you hold will depend on factors such as:

  • reliability of supply
  • price increase forecasts
  • the stability of demand
  • discounts for mass purchases


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