The Standard Operating Procedure for Inventory Control

by Mary Jane; Updated September 26, 2017

There is no standard operating procedure for inventory control, as each individual inventory differs in size, items available and management resources. However, there are common procedures business owners use to control the items and monetary value of the business inventory. All of the operating procedures for an inventory help manage the wastes and losses of the overall inventory value.

FIFO

One common operating procedure for inventory control is the FIFO method, which essentially means first-in, first-out. The procedure involves removing items from the inventory in chronological order, which means removing the first item entered into the inventory system. This is a standard and common control procedure for inventory items that have expiration dates, so items are not left in the inventory to expire and become wastes.

Perpetual Procedure

A common standard operating procedure for smaller inventories is the perpetual control procedure. This procedure involves counting inventory items every day to ensure continuous control. The daily counts are done by completing manual counts, automated counts through computer inventory systems or barcode scanning systems. The perpetual control procedure is useful for inventories with expensive items, such as electrical or technological devices like computers or flat-screen televisions.

Periodic Procedure

The periodic operating procedure is the least time-consuming control procedure, as the inventory figures are only updated once per year, which is at the end of the company’s accounting or fiscal year. A business compares its starting inventory figures with the figures at the end of the fiscal year to determine the overall losses or value gained, rather than controlling each individual item on a frequent basis. This control method provides the business owner with sales or loss figures to future inventory planning.

Importance of Inventory Control Procedures

Inventory control procedures are important because the valuable items within a company’s inventory are part of the overall assets, which essentially affects the company’s net worth. Purchasing too many items for an inventory may result in monetary losses if the items cannot be sold for preferred price. Controlling procedures are in place to ensure the company is earning rather than losing money for inventory items.

About the Author

Based in Toronto, Mary Jane has been writing for online magazines and databases since 2002. Her articles have appeared on the Simon & Schuster website and she received an editor's choice award in 2009. She holds a Master of Arts in psychology of language use from the University of Copenhagen in Denmark.