Struggling to keep track of raw materials or finished products in your manufacturing business? You’re not alone—efficient inventory control can make or break a company’s success.
Properly managing inventory helps prevent costly shortages, overstocking, and production delays. It ensures you meet customer demand while controlling expenses, which is crucial in today’s competitive landscape.
In this article, we’ll walk you through practical steps and proven tips to master inventory control, helping your business run smoother and smarter.
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How to Control Inventory in a Manufacturing Company
Effectively controlling inventory is crucial for the success of any manufacturing business. When done right, inventory control keeps production running smoothly, minimizes costs, improves cash flow, and enhances customer satisfaction. But manufacturing companies face unique challenges—tracking raw materials, managing work-in-progress, and ensuring finished products are available just in time.
Below, you’ll learn what inventory control in manufacturing means, why it matters, and practical strategies to master it.
Understanding Inventory Control in Manufacturing
Inventory control refers to the process of managing and overseeing stock—raw materials, components, work-in-progress (WIP), and finished goods—so the right materials are available at the right time, in the right quantities. In manufacturing, this can get complex due to fluctuating demand, lead times, and multi-stage production.
Why Is It Important?
- Prevents production delays due to material shortages.
- Avoids excess stock, which ties up cash and takes up space.
- Reduces waste and obsolescence.
- Improves order fulfillment and customer satisfaction.
- Enables accurate forecasting and efficient resource allocation.
Core Steps and Principles for Inventory Control
Let’s break down the essential actions for controlling inventory in a manufacturing environment. These steps apply to businesses of all sizes.
1. Identify Your Inventory Types
In manufacturing, you typically manage several types of inventory:
- Raw materials – Basic items used to make your products.
- Work-in-progress (WIP) – Partially finished goods still being produced.
- Finished goods – Completed products ready to ship.
- Maintenance, repair, and operations (MRO) supplies – Items needed to keep machines running.
2. Implement Inventory Management Systems
A robust inventory management system (IMS) is the backbone of effective control. These systems can automate tracking, provide real-time insights, and streamline processes.
Benefits of an IMS:
- Reduces manual errors and data entry.
- Enables real-time stock visibility.
- Integrates with purchasing, sales, and production data.
- Automates reordering based on set thresholds.
Modern cloud-based IMS platforms support barcode scanning, lot tracking, and compatibility with ERP (Enterprise Resource Planning) solutions.
3. Track Inventory Accurately
- Use unique identifiers (like SKUs or barcodes).
- Regularly update inventory records.
- Track movement during receiving, storage, production, and shipping.
- Monitor both quantity and location for each item.
4. Standardize Inventory Audits
Regular stock takes or cycle counts verify system records against physical inventory. This helps catch discrepancies early.
Best practices:
- Schedule full physical counts (annually or quarterly).
- Use cycle counting—checking a small portion of inventory periodically—to reduce disruption.
- Investigate and resolve any differences immediately.
5. Optimize Reordering Systems
When and how you reorder materials is critical. Use demand forecasting and sales history to set:
- Minimum stock levels – The lowest amount you should have before reordering.
- Reorder points – When inventory hits a certain number, it triggers a reorder.
- Economic order quantity (EOQ) – The optimal order size to minimize holding and ordering costs.
6. Apply Inventory Management Techniques
Successful manufacturers often use proven inventory methods, including:
- ABC Analysis: Categorize inventory into three groups:
- A — high-value, low-quantity items
- B — moderate value and quantity
- C — low-value, high-quantity items
- Just-In-Time (JIT): Receive materials only as needed, minimizing holding costs. Requires reliable suppliers and tight scheduling.
- First-In, First-Out (FIFO): Use oldest stock first, especially important for perishable or time-sensitive items.
- Kanban: Visual cards/systems to signal when to reorder or produce more inventory.
- Batch Tracking: Track production and raw materials by lot/batch for quality control and recalls.
7. Integrate Demand Forecasting
Predicting how much stock you’ll need helps prevent shortages and overstock. Use:
- Historical sales data
- Market trends
- Seasonality patterns
- Sales and production forecasts
Regularly revisit and adjust forecasts as new data comes in.
8. Streamline Supplier Management
A strong relationship with reliable suppliers reduces lead times and minimizes disruption.
- Communicate regularly about demand changes.
- Evaluate supplier performance (timeliness, quality, responsiveness).
- Have backup suppliers in case of emergencies.
9. Set Inventory KPIs and Review Regularly
Track key performance indicators like:
- Inventory turnover ratio
- Stockout incidents
- Order accuracy rate
- Carrying costs
Review these KPIs to spot trends, inefficiencies, or opportunities for improvement.
10. Train Staff and Standardize Procedures
Everyone involved—from warehouse staff to procurement and production—should understand inventory procedures.
- Provide clear documentation and training.
- Foster accountability and encourage reporting of issues.
- Regularly review and update processes as the business grows.
Benefits of Strong Inventory Control
Taking inventory control seriously delivers big wins for your manufacturing business:
- Cost Savings: Fewer storage and handling costs, less waste.
- Better Cash Flow: Money isn’t tied up in unused stock.
- Product Quality: Easier to trace issues and ensure consistent standards.
- Customer Satisfaction: Meet delivery promises and minimize backorders.
- Operational Efficiency: Less production downtime and bottlenecks.
Common Challenges—and How to Overcome Them
Manufacturing presents special inventory management challenges. Here’s how to tackle a few of the most common:
- Complex Product Structures: Use a bill of materials (BOM) to track parts needed at each production stage.
- Changing Demand: Update forecasts frequently and build flexibility into your system.
- Inventory Shrinkage (theft, loss): Increase security, track user access, and audit records.
- Obsolete Stock: Regularly review inventory and phase out slow-moving items.
Practical Tips and Best Practices
Want to take your inventory control to the next level? Try these practical strategies:
- Automate Where Possible: Use software, scanners, and sensors to minimize manual errors.
- Implement Real-Time Inventory Tracking: Know exactly what you have and where it is—at all times.
- Set Clear Policies: Standardize how inventory is received, stored, moved, and recorded.
- Cross-Train Employees: Ensure multiple people can handle key tasks, reducing risk if someone is absent.
- Regularly Review Slow-Moving Items: Offer promotions or discounts to move old stock, and adjust reordering thresholds.
- Embrace Lean Manufacturing: Focus on reducing waste at every stage of production and inventory.
New Trends in Manufacturing Inventory Management
As the sector evolves, so do inventory management trends:
- Cloud-Based and Mobile Solutions: Manage stock from anywhere, improve collaboration, and enable real-time updates.
- Integration with IoT Devices: Use smart sensors to monitor inventories, equipment status, and supply chain logistics.
- Advanced Analytics and AI: Predict demand more accurately and detect patterns that humans might miss.
- Sustainability Initiatives: Reduce waste, source responsibly, and optimize energy use.
Summary: The Foundation of Manufacturing Success
To control inventory in a manufacturing company, focus on visibility, accuracy, and efficiency. Leverage technology, proven management techniques, and ongoing staff training. By making inventory control a business priority, you reduce costs, improve profits, and exceed customer expectations. Inventory isn’t just a cost to manage—it’s a strategic asset that drives growth when handled wisely.
Frequently Asked Questions (FAQs)
What is the difference between inventory control and inventory management?
Inventory control focuses on tracking and regulating current stock levels—making sure you have what you need without excess. Inventory management is broader; it includes planning, ordering, forecasting, and overseeing all inventory-related activities across the business.
How often should a manufacturing company conduct inventory counts?
It’s best to mix full physical counts (annually or quarterly) with regular cycle counts—checking subsets of inventory continuously throughout the year. This approach keeps records accurate without disrupting operations.
What is Just-In-Time (JIT) inventory, and is it risky?
JIT means receiving and using inventory only as needed for production, reducing holding costs. It can be risky if supply chain disruptions occur, because you have less buffer stock. It works best with reliable suppliers and strong forecasting.
How can I reduce obsolete or excess inventory?
Review inventory data often to spot slow-moving items. Adjust your safety stock and reorder points. Liquidate or discount obsolete products, and update your production planning processes to match demand more closely.
Do small manufacturers need inventory management software?
Yes. Even small manufacturers benefit from inventory management software. It reduces manual errors, saves time, and gives you real-time visibility—making it easier to scale operations, even with limited staff.
Mastering inventory control is a continuous journey. Keep learning, adapting, and investing in the right tools and practices, and your manufacturing business will reap the rewards.
