Inventory Control Charts | 60 Second Business

Added: 2026-05-16

[00:00:00]Let's spend a minute looking at inventory control charts.

[00:00:03]An inventory control chart is a tool to help business manage their stock levels.

[00:00:08]Aiming to make sure that the business has enough stock to meet demand, but not so much it ties up cash and working capital.

[00:00:15]So the inventory control chart plots stock levels or quantities over time, and three levels define the approach.

[00:00:23]Firstly, the maximum stock level. That's the most stock the business is prepared to hold. That's set by things like storage capacity, and maybe the cost of money tied up in inventory.

[00:00:33]Next, minimum stock level. This is the buffer level below which stock should never fall. It's also called the safety stock. It protects against unexpected spikes in demand or delays from suppliers.

[00:00:45]And third, the reorder level. This is the trigger point at which a new order is placed with suppliers.

[00:00:52]And it should be set high enough above the minimum so that stock doesn't run out before the new stock arrives.

[00:00:59]The stock also shows lead time, which is the gap between placing and receiving the order, and reorder quantity. That's how much is ordered each time.

[00:01:09]So as you can see from the chart, stock falls steadily as it's used, then jumps up vertically when the new stock arrives. So done well, this sawtooth pattern should hopefully stay between the maximum and the minimum stock.

[00:01:23]Now, you don't have to use a stock control chart. Modern alternatives include just-in-time, where stock is delivered only when needed, and that should remove the buffer entirely. But the point is for any business, inventory control is like a balance between availability of stock and the cost of holding it, and the stock control chart is a great way of keeping both in check.