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How Inventory Management and Inventory Control Differ

August 6, 2018

Every year, the international research and advisory firm, Gartner, releases a list of the most successful supply chains in the Fortune Global 500 and Fortune Global 2000.

To create the list, the firm’s analysts review two components: a qualitative measure of business performance and a peer-reviewed assessment of each company’s supply chain capabilities. The assessment includes the capabilities of an entity’s Return on Assets (ROA), inventory turns, revenue growth, and corporate social responsibility. Thereafter, those numbers are balanced with the qualitative analysis of each chain’s strategy.

As a result, Gartner’s final cut, the remaining 25 companies, not only exhibit some of the leanest supply chains in the world, they also demonstrate creative, industry-changing ways to execute inventory management and approach inventory control.

Though these terms are often used interchangeably, they address fundamentally different parts of supply chain management. Using examples from the Gartner Supply Chain Top 25, we’ll examine the difference.

What is Inventory Management?

Inventory management deals with the fulfillment process. Namely, inventory management requires accurate inventory stocking numbers and whereabouts, cost-effectiveness pricing of inventory, and reorder point awareness. This is an automated process that combines information technology and supply chain logistics.

The fast fashion retailer, H&M, regularly breaks the Gartner’s top 10 because it uses a unique formula to reduce the company’s Economic Order Quantity (EOQ). Ultimately, the company cuts costs by outsourcing all external manufacturing and buying to partners in Europe and Asia.

The primary objective of inventory management is stock availability and pricing.

What is Inventory Control?

By comparison, inventory control handles all of the ins and outs of warehouse management. Inventory control requires a real-time examination of which item is currently in stock and how much of it is available for assemble at your organization’s warehouse. For example, another regular top 10 lister, Walmart, uses inventory forecasting to maintain a real-time picture of what’s in stock and when new stock becomes available.

The primary objective of inventory control is cost. Inventory can be the most daunting expense in a organization because of the high cost of products just sitting on a shelf.

Rely on a fulfillment partner.

Let’s face it, the businesses on Gartner’s list manage a significant volume of products and rely on the discipline of a supply chain department to ensure their products and equipment are managed and controlled. But what if you have smaller inventories, no warehouse, or want to shed the overhead (and headache) that is required in inventory management?

Then you’re like many businesses who do not have the warehouse space or competency to manage or control inventory and shipping processes. The good news is, you can rely on a partner to fulfill this specialty for you. In other words, a fulfillment partner can help your business with these complex processes by managing inventory on your behalf.

If inventory management and inventory control are not your business’s forte, you can reach out to us to discuss how we might partner with you to ensure your equipment is properly stocked, tracked, picked, packed and shipped.