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A retailer orders 12 oak dining tables from your latest catalog. While processing the order, the sales rep realizes halfway through that the inventory system indicates zero stock available. However, the sales rep is confident that 15 chairs are in stock. After several back-and-forth calls with the warehouse and experiencing an awkward delay, the buyer cancels the order. The customer leaves feeling frustrated, and the sales rep loses valuable time, all due to inaccurate inventory data. Poor inventory control leads to missed opportunities, overpromising, and wasted internal resources.
To avoid costly situations, manufacturers and distributors need real-time, reliable visibility into what’s in stock, where it’s located, and when it can be delivered. In this article, we’ll explore the best practices and tools for inventory control, so you can prevent errors, protect your margins, and provide a better experience to your B2B buyers.
What is inventory control?
Inventory control manages product stock: tracking what’s available, where it’s located, and when to restock. It’s essential for maintaining balance: enough supply to meet demand, but not so much that resources are wasted.
What Problems Does Inventory Control Solve?
Without proper oversight, businesses face stockouts, overstocking, delays in fulfillment, and poor demand forecasting. These issues lead to wasted resources, lost sales opportunities, and damaged customer trust. Inventory control creates a single source of truth and helps eliminate these risks, reducing human error and preventing financial loss.
How It Affects Company Earnings
Better inventory control leads to better margins. It helps reduce unsold stock, cut emergency procurement costs, and support more accurate demand forecasting. It also minimizes manual corrections and refunds. The result is smoother operations and more substantial cash flow, allowing businesses to grow without increasing overhead.
Which Businesses Need Inventory Control the Most?
Inventory control is vital for any B2B business managing an extensive product catalog, complex supply chains, or multiple sales channels, especially distributors, wholesalers, and manufacturers. The more variables involved, the more critical it is to manage stock precisely. Without it, scaling becomes chaotic and unsustainable.
What data is needed for inventory control?
Effective inventory control relies on accurate, real-time data. B2B businesses must track specific information across the supply chain to avoid costly stockouts, overstocking, and operational delays. Here’s what’s essential:
Product Information
Each item should have a unique SKU or product code, detailed description, dimensions, weight, and relevant attributes (e.g. color, material, or category). This ensures clarity across systems and departments.
Stock Levels
The real-time quantity on hand, available to promise (ATP), safety stock thresholds, and reorder points must be constantly updated. This data helps trigger restocking and ensures you never sell what you don’t have.
Location Data
Knowing where each product is stored by warehouse, shelf, or bin is crucial for quick fulfillment. For businesses with multiple locations, centralized visibility avoids confusion and costly misrouting.
Supplier and Lead Time Information
Details about suppliers, order minimums, restock frequency, and average delivery lead times help plan procurement accurately and prevent gaps in availability.
Sales and Order History
Historical data on order volume, frequency, seasonality, and customer behavior help forecast demand and optimize purchasing.
Inbound and Outbound Movement
Track all product movement, including incoming shipments, transfers between locations, returns, and customer orders, to ensure the numbers are always current.
Pricing and Cost Data
Track unit costs, price tiers, discounts, and margin levels to understand how inventory impacts profitability.
Alerts and Exception Logs
Set up thresholds that trigger alerts for low stock, fast-moving items, or items sitting too long. Logging exceptions helps identify patterns or inefficiencies.
4 Main Inventory Control Challenges
Effective inventory control can transform operations, but many businesses face obstacles that hinder accuracy and efficiency.
Stock visibility
Not knowing exactly what’s in stock, where it’s located, or how fast it’s moving creates bottlenecks throughout the supply chain. Lack of visibility leads to overstocking, wasted resources, or stockouts.
Manual tracking
Many businesses still rely on spreadsheets or isolated systems to manage inventory. This manual approach is error-prone, time-consuming, and fails to provide real-time updates. It also makes collaboration between departments difficult, especially when teams rely on conflicting data.
Forecasting demand
Accurately predicting demand is a constant challenge. Seasonal fluctuations, sudden shifts in buyer behavior, and supply chain disruptions can throw off even the most prepared teams. Without historical data or predictive tools, businesses often over-order or understock, resulting in losses.
Lack of integration
Inventory data isn’t connected to ERP, CRM, or sales platforms, and becomes siloed. When systems don’t talk to each other, teams operate in the dark, unable to react quickly or provide accurate information to customers. This slows down workflows and damages trust.
How to control inventory?
There are several ways to manage inventory, each with different levels of accuracy, efficiency, and scalability. The choice depends on your business size, complexity, and growth goals.
Manual
This method involves counting stock by hand and writing it down on paper or basic logs. While low-cost, manual control is time-consuming and prone to human error. It often leads to mismatches between actual and recorded stock levels, causing delays, missed orders, and unnecessary reordering.
Spreadsheets
Many small businesses use spreadsheets like Excel or Google Sheets to track inventory. They allow basic calculations and can be shared among team members. However, spreadsheets don’t update in real time, can’t handle large volumes of data reliably, and are easily broken by input errors or formula mistakes. As operations grow, spreadsheets become more of a liability than a solution.
Inventory control system
A dedicated inventory control system automates tracking, updates stock levels in real time, and integrates with other tools like sales apps, CRM, or ERP platforms. This approach minimizes errors, improves department visibility, and supports faster decision-making. It’s the most reliable method for businesses with multiple warehouses, SKUs, and customer segments.
6 inventory control techniques
Inventory control uses proven methods to manage stock efficiently, avoid waste, and meet customer demand. These six techniques help B2B businesses improve accuracy, reduce costs, and stay flexible as they scale.
FIFO and LIFO
FIFO (First In, First Out) ensures the oldest stock is sold first. It’s essential for businesses dealing with perishable goods, materials with expiration dates, or design styles that change seasonally (e.g. textiles or finish options).
On the other hand, LIFO (Last In, First Out) assumes that the newest inventory is sold first. While less common in physical goods, it may be used for financial or tax purposes in specific markets.
JIT
Just-In-Time inventory aims to receive goods only when they are needed, reducing storage costs and minimizing excess. This approach works best when supply chains are stable and predictable, allowing businesses to match supply closely with demand.
Furniture manufacturers might use JIT to manage fabric rolls or metal frame components for custom upholstered seating. Instead of holding every material in stock at all times, they coordinate tightly with suppliers to deliver specific materials when new production cycles begin.
For B2B businesses, especially those dealing with oversized or high-value components, JIT can significantly lower overhead by reducing unused stock and freeing up warehouse space. But it also demands accurate forecasting and close supplier relationships to avoid fulfillment delays.
ABC Analysis
ABC analysis divides inventory into three categories based on value or importance:
- A items: High-value, low-quantity stock that requires close monitoring
- B items: Moderate-value products with steady turnover
- C items: Low-value, high-volume stock that can be managed with simpler controls
By focusing on high-impact products, businesses can maintain optimal stock levels where they matter most, reducing the risk of stockouts on key items and avoiding unnecessary inventory buildup on less critical ones.
In the lighting industry, for example, A items might include premium designer fixtures or limited-edition pendants that are highly profitable but ordered less frequently. These need close monitoring, as running out could mean missed high-value sales.
B items could include popular mid-range floor lamps or sconces that sell consistently and contribute solid revenue. They require regular attention but are easier to manage.
C items might be standard light bulbs, extension cords, or lamp shades sold in bulk. These move quickly and inexpensively, so businesses can manage them with more flexible reordering systems.
This prioritization is crucial for distributors with extensive, diverse product catalogs. Balancing high-margin, slow-moving pieces and fast-selling, low-cost items requires thoughtful planning. ABC analysis helps teams focus their time and resources where they’ll have the most significant impact.
Safety Stock
Safety stock acts as a buffer against demand spikes or supplier delays. Calculating optimal safety stock levels ensures product availability without tying up too much capital.
Maintaining an optimal safety stock level is essential for an industry where lead times can be long and demand varies by season or region. For example, a furniture brand may hold additional inventory of popular dining chairs before the holiday season, or a lighting supplier might stock extra LED drivers due to frequent restocking delays from overseas manufacturers.
When managed well, safety stock protects customer relationships, reduces lost sales, and builds resilience into your supply chain, without overspending on inventory that may never move.
Cycle Counting
Cycle counting verifies inventory accuracy by checking selected items on a regular schedule, rather than performing a full physical count once a year. Instead of shutting down your warehouse for a massive audit, your team counts a small, manageable portion of inventory each day, week, or month.
For instance, a furniture distributor might check high-value items like marble tables or designer chairs weekly, while reviewing bulk accessories such as cushions or lamp bases once a quarter. Lighting suppliers might cycle-count fast-moving SKUs like bulbs or fixtures more frequently than slower-selling specialty items.
This approach helps identify discrepancies early, such as missing items, input errors, or misplacements, before they snowball into fulfillment delays or financial loss. It also keeps operations running smoothly, since there’s no need to pause sales or warehouse activity during a full inventory count.
Cycle counting is especially effective when paired with an inventory control system that flags which items to review and how often, based on sales volume, value, or past inaccuracies. The result is cleaner data, fewer surprises, and greater confidence in every order you ship.
Reorder Point Formula
The reorder point formula assists businesses in determining the ideal moment to reorder a product. This ensures that they do not reorder too early, which can lead to overstocking, or too late, which can result in stockouts. The formula is based on an item's sales velocity and the time required to receive a new shipment.
The basic formula is:
Reorder Point = Average Daily Usage × Lead Time (in days)
Imagine this: a lighting distributor sells 10 wall sconces per day, and the supplier takes 7 days to deliver. The reorder point would be 70 units. When inventory drops to 70, it’s time to place a new order.
More advanced versions of this formula also include safety stock, which adds a buffer in case of demand spikes or shipping delays:
Reorder Point = (Average Daily Usage × Lead Time) + Safety Stock
This method is especially valuable for B2B companies managing hundreds or thousands of SKUs, such as furniture wholesalers with dozens of finishes, sizes, or configurations. Automating reorder point calculations inside your inventory system ensures you don’t rely on guesswork and that orders are placed at the right time based on real data.
When used consistently, this formula helps maintain stock accuracy, improve service levels, and reduce the stress and cost of emergency restocking.
Measuring Inventory Control Success
Once inventory control systems are in place, tracking performance and identifying improvement areas is essential. Key metrics include:
Inventory Turnover Ratio
Measures how often inventory is sold and replaced during a period. Higher turnover indicates efficient inventory management.
Days Inventory Outstanding (DIO)
Calculates the average number of days inventory stays in storage before being sold. A lower DIO reflects faster movement and less capital tied up in stock.
Stockout Rate
Tracks how often items are out of stock when ordered, a direct measure of planning accuracy.
Carrying Cost of Inventory
Includes storage, insurance, depreciation, and opportunity costs associated with holding inventory.
Order Accuracy Rate
Compares fulfilled orders to what was requested, highlighting fulfillment quality.
Backorder Rate
It reveals how often customers must wait due to unavailable inventory, a red flag for supply chain inefficiencies.
Monitoring these KPIs regularly helps furniture and lighting distributors make smarter decisions, reduce waste, and increase customer satisfaction.
