4 Inventory Control Methods You Need to Know

Juggling inventory, Fishbowl BlogIt’s all well and good to discuss inventory management in the abstract, but now we’re going to get down to the nitty-gritty details of making it work.

I found an interesting article entitled “Inventory Control Methods,” which talks about the best and worst ways to manage your inventory. The author of that article described four helpful inventory control methods businesses can use.

Here are those methods, along with their pros and cons:

Min-Max System. After a careful examination of your inventory needs, you set two lines – one at the top and one at the bottom of how much of each product you must keep on hand. When you reach the bottom line, you order enough of that product so you won’t go above the top line. As long as you’re somewhere in the middle, you’re okay.

Pros: This method is simple and it makes the task of balancing inventory fairly straightforward.

Cons: Its simplicity could lead to trouble because you might order too many products or run out before they arrive.

Two-Bin System. In this system, you have a main bin and a backup bin of products. You normally use the main bin, but once you run out and need to reorder, you use the backup bin to fill orders until the new products are received.

Pros: You’ve always got spare products for emergencies and sudden rises in demand.

Cons: The products in the backup bin could spoil or become obsolete unless they are cycled into the main bin every now and then. Also, you need to keep an eye on your carrying costs.

ABC Analysis. Separate your products into three groups: A, B and C. Expensive items go into A, less-expensive items go into B, and small parts and other inexpensive items go into C. This way, you can organize your data and know how long it will take to order different parts and products, based on which group they’re in.

Pros: Now this is more like it. This system doesn’t set rigid standards on how many products to keep on hand; it simply tells you how long it will take to order those products. You can do the rest with the help of inventory control software.

Cons: It still requires a lot of work to maintain healthy inventory levels.

Order-Cycling System. Forget constantly checking your inventory. This system lets you do inventory checks at set intervals (e.g. 30 days) and reorder products that are likely to run out by the next check.

Pros: If you’re REALLY good at inventory management, you might be able to pull this off. It certainly doesn’t require as much time as other methods.

Cons: This system is risky and costly! Doing a physical inventory check every 30 days or so will get expensive quickly. And there’s no margin for error on ordering the right amount of products at each check.

There you go! Now you can decide which of these inventory control methods will work best for your organization, depending on your size, products and needs.

About Robert Lockard

Robert Lockard is a copywriter with Fishbowl. He writes for several blogs about inventory management, manufacturing, QuickBooks and small business. Fishbowl Inventory is the #1-requested inventory management software for QuickBooks users. Robert enjoys running, reading, writing, spending time with his wife and children, and watching movies. His favorite movies include Mr. Smith Goes to Washington, Fiddler on the Roof, Back to the Future and Lawrence of Arabia.
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15 Responses to 4 Inventory Control Methods You Need to Know

  1. Pingback: Inventory Management vs. Inventory Control | Inventory System Software Blog

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  3. Pingback: Which Inventory Control Method Is Right for Your Business? | Fishbowl Inventory Blog

  4. manoj malik says:

    VERY GOOD ANSWER

  5. Hancy says:

    I found this article so useful. it help me throughout my research work. A million thanks to the writers of this article.

  6. jhevante lyons says:

    this is a very good article.. which it had gone a little more indepth into each area but none the less informative

  7. Pravindar Rana says:

    this is a very good article and more useful for inventory control.

  8. Juma says:

    Can u send me more notes about inventory

  9. Rakesh says:

    Nice & useful answers ,
    I would like to know how
    to fix Min,Max,reorder levels using ABC analysis .

  10. Ibrahim murana says:

    I appreciate your explanation but i still need more details on inventory control.

  11. khusema says:

    An interesting article, keep it up, man…….

  12. rhoda says:

    I found this article very useful but please add more on the pros and cons!

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