Inventory Control Methods Compared
Businesses control inventory in different ways. It depends on how often stock is reviewed and how orders get triggered. Here's how the main methods work, and when each one tends to fit best.
There's no single "correct" way to control inventory. Different methods trigger reorders in their own way. The right choice depends on how predictable demand is, how many SKUs a business manages, and how much manual work is practical day to day.
Reorder Point (Continuous Review)
Under this method, stock is watched nonstop. A new order is triggered the moment an item hits its reorder point. This keeps ordering closely tied to actual use. But it needs a real-time, or near real-time, view of stock levels to work well.
Periodic Review
Instead of watching stock nonstop, periodic review checks inventory at set times — say, every Monday. It orders enough to bring stock back up to a target level. This is simpler to manage across many items at once. But it can react more slowly to sudden demand changes than continuous review does.
Min-Max Method
This approach sets a minimum stock level (similar to a reorder point) and a maximum level. When stock falls to the minimum, an order is placed to bring it back up to the maximum. It's simple to apply, and it works well for items with fairly steady demand.
Just-in-Time (JIT)
JIT aims to keep stock as low as it can. It orders only what's needed, close to when it's needed. This cuts carrying cost and lowers the risk of dead stock. But it depends a lot on reliable, fast suppliers, since there's little buffer to absorb a delay.
Choosing Between Methods
Reorder point and min-max work well for teams that need responsive, item-level control. Periodic review suits teams managing large numbers of SKUs, where checking everything nonstop isn't practical. JIT fits businesses with reliable, fast suppliers and steady demand, where keeping stock on hand low is the goal. Many businesses end up mixing methods. They use tighter control for high-value items and simpler methods for the rest.
Key Takeaways
Reorder point, periodic review, min-max, and JIT each trigger reordering in a different way. Each one trades speed against ease of use. Match the method to how predictable your demand is, and how many items you need to manage. That matters more than picking a single "best" approach.
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