Control of Inventory Matters

by Diane M. Calabrese | Published September 2025

 

 

Tool chest? Spice shelf? Both?

There’s nothing unfamiliar about inventory, including how vexing it can be.

Nothing evaporates faster than certainty about a spare fuse or a container of chili powder when the fuse is urgently needed or the chili dinner requires seasoning. Where do things go?

Even worse may be having a spare part or a spice but realizing it is far past its expiration date. Control of inventory matters.

Service businesses require controls just as urgently as manufacturers or distributors. A comprehensive set of spare parts, from small fittings to backup nozzles and hoses should be part of the mobile inventory in every contractor’s truck or van.

It’s fortunate that with the techno-driven inventory systems available to manufacturers and distributors, they never experience a where-did-it-go moment. Until they do.

Digital inventory systems are only as reliable as the scope of the system and the parameters established for input. Scope establishes which items are included. For example, should restroom towels and toilet paper be inventoried along with everything else?

Then, there are the set points, or parameters. What level of spares indicates it’s time to reorder? And at the other end of the spectrum, when is the level of spares so high – possibly static – that it’s time to make a change to automatic reorders?

Not every business owner will handle inventory the same way. An owner-operator contractor with a strong distributor partner can get a lot of help through regularly scheduled reorders and even reminders.

Still, in an economy where priorities of buyers across the links of commerce change frequently, prediction and stability – two critical factors in inventory control – are not easy. The inventory controls at one business can only be perfected to the point that the business can make solid assumptions about the inventories of its vendors and buyers.

“The most difficult thing is having vendors that can keep their own inventories stocked so you can count on rapid and consistent supply,” says Linda Chambers, brand and sales manager at GCE/Soap Warehouse in Norcross, GA. “Small businesses can’t spend their money and space to stock up when demand is low, as that can cripple your cash flow with money just sitting on a shelf.”

Bringing balance to inventory is essential to ensure that cash flow does not get disrupted. On the other hand, not holding items in stock can also disrupt the function of a business.

“[Not] having stock at all and you can’t generate cash flow at all,” says Chambers. It is the proverbial horns of a dilemma.

Finding a way to control inventory is a must for avoiding the dilemma. Does Chambers have any advice?

“We try and set inventory minimums with triggered re-order lists,” says Chambers. But she adds that it may not be a universal solution to the problem.

“[If] we have sent in those orders and they are not being met, there is nothing we can do,” explains Chambers. “Sometimes going to another vendor does not help either, as with an industry-wide outage of items.”

Unfortunately, the complexity of an order that cannot be immediately filled can cascade into more issues. Consider what happens if a buyer waits for a back-ordered item.

“[When an item] does come available, all the vendors get it at the same time, fill their back orders and then we get double or triple what we need to have on hand,” says Chambers. Of course, that creates storage and other issues.

Consistency is a must for a supply chain to function smoothly. Put the emphasis on the word ‘chain’ because if a link weakens or gets severed even for a short time, the negative results begin to accumulate.

Chambers cites the many factors that have had adverse effects on the supply chain since 2020. They include the pandemic and tariffs.

“[It] is much better than it was a few years ago,” says Chambers, explaining the pandemic was more difficult to deal with than tariffs. “[But] until vendors get themselves back to getting their supply consistent, we as contractor suppliers will not be able to either.”

As for the structured programs and apps available to optimize inventory control, they may be right for some companies. But many companies prefer to put together their own system.

“[We] just use the set inventory part of our own programs to set and maintain stock levels,” says Chambers. “But even then, we have to adjust those numbers to account for the time of year. For example, we will not need to keep the same level of wood stripper or paver sealer in winter as we do once spring and summer is here — when most of our work is done.”

The dynamic nature of inventory makes it a challenge. If outmoded parts or tools are still in stock, they are just taking up space.

It’s a troubling aspect of commerce and industry that society does not have adequate methods for recycling items that are never coming back into use, such as VHS tapes and floppy disks. But along with chemicals – and kitchen spices, that have passed an expiration date, they must be discarded (properly).

Yes, it is like throwing money away because the cash invested in the items was cash not well spent. Could an exacting method of inventorying have prevented over-buying of some items? Absolutely.

It’s not always possible to achieve no waste when maintaining stock. But it is possible to reduce waste (of goods, resources and money) with prudent checks on what’s in stock.

 

Interested parties

The day-to-day of keeping pace with what’s in stock and what’s not is of immediate concern to the business itself. Yet keep in mind the many other interested parties.

Certainly, at top of the list is a prospective buyer who wants to know that an order can be filled immediately. Identifying a product as ‘in stock’, taking an order, and then making a switch to ‘on order’ is a sure way to infuriate the buyer.

Things happen – two orders coming in almost simultaneously via different channels but avoiding confusion over the availability of items is a must. Ease of business flow is the top reason that inventory control has to be reliable and accurate and scrupulously maintained.

Parties interested in the inventory of a company go well beyond buyers. They include the IRS, lenders, and other companies that might want to buy the business. (At some point a business will close – either because it collapses financially, or more happily because it thrives and the owner wants to sell and take on a new venture.)

Valuation of a business includes all assets – land, structures, furnishings and inventory. A possible buyer will look at the valuation and its components closely. Many a buyer will want to review the fluctuation in inventory over several years because it stands as an indicator of the trajectory of the company – growing, stable, slumping.

Lenders also want an accurate picture of the valuation of a company. Yes, companies may be able to get an unsecured loan from the U.S. Small Business Administration (SBA). But once a business is viable (beyond start-up) getting financial backing or a line of credit from a financial institution requires evidence that there’s something that can be reclaimed if the business fails.

Tax laws regarding inventory – particularly obsolete inventory (i.e. the floppy disks) – are complicated. Even though obsolete inventory can bring tax advantages, most businesses do not have enough of it to get a real boost from a write-down of its worth.

Let’s emphasize the complicated dimension. If obsolete items merited some sort of tax advantage when they were purchased or depreciated, the IRS will be keen to recapture the amount of the advantage. It’s a good reason to simply sell things – for whatever small price they may bring – that fall into the category of obsolete inventory.

Old laptop computers? (Just one example…) Don’t bet they will come out of storage and be refurbished. Sell them and declare any profit. It saves space if not money.

Giving unused inventory to a charity can bring some tax benefit. Again, the rules are complicated. And in this litigious society, be careful regarding donations of anything that might cause injury to the recipient.

Inventory control is not a glamorous endeavor. Taking stock – itemizing and evaluating property – is, however, an essential component of business.

Even the smallest company should know the entirety of its assets. Perhaps a simple list will do.

As a business grows, its inventory methods generally become more refined. Larger companies now have records of which companies are buying what (and when and how much). And there are manufacturers that integrate their inventory systems with distributors.

Business-to-business integration of inventories enables dynamic forecasting. For instance, a manufacturer can more accurately predict how much product to make given how rapidly the product is purchased. The dynamism quells over-production.

But on the level of the individual business, excellent inventory methodology does its most important work. It prevents buying what’s not needed. No overstock, no waste, and no cash tied up on shelves.