The Relationship Between Inventory Management and Quality Control

Inventory as we know, is the stock of goods either on hand or stored nearby to facilitate the running of a business, for the purpose in which that business exists. Inventory control systems exist to maintain inventory balance, replacing inventory at a steady rate consistent with its depletion rate. It is necessary to balance inventory stock levels to reduce waste and minimise the risk of damage to that inventory stock.  

Effective inventory control streamlines processes and helps to identify problems at their source, thereby helping to improve quality control. Optimal inventory control provides ease of access for workers, reduces inventory costs and increases profitability. In manufacturing, for instance, finished goods are the sum of all the parts.  

So, having the right materials on hand can ensure high-quality products are being produced. Production line staff need parts to keep the operation running smoothly and this means easy and ready access to necessary parts and components. Having standardised locations of individual parts or products makes it easier for workers to find and distribute stock to the desired location. The business avoids downtime because staff are not looking for or waiting on inventory parts. 

Quality control is the implementation of a predetermined set of processes and procedures that measure quality metrics by assessing specific results against these standards. The process of quality control is conducted and monitored throughout a production run or business cycle.  

The practice of quality control is to ensure that the quality metrics are met by measuring both the levels and the quality of output. Inventory control software helps businesses to identify problem areas ensuring that quality control is managed throughout every stage, from origin to point of sale.  

In addition to internal quality measures, quality control can also be compliance to international, safety and environmental standards and certifications relative to a specific industry. Done well, quality control will play an important role in contributing to your company’s positive reputation. 

Quality control and inventory control are equally important to the ongoing success of your business. Both form the basis of an efficient organization that operates at high productivity levels, minimizes waste, and delivers quality products to meet or exceed consumers’ expectations. 

Let’s explore the impact one can have on the other, and vice versa:

Decluttering Space 

Inventory management systems not only organise inventory, but they also promote better physical organisation of the warehouse. Have you heard the old adage, ‘A cluttered space is a cluttered mind’? This can be applied to inventory management. By decluttering and organising inventory stock, items are easier to find and more likely to be used in a timely manner which promotes quality. This affects quality in all areas of the company as time is saved so staff can spend more time on more value-added activities; the physical storeroom and space is easier to keep clean, enhancing the quality of the product; and staff morale is improved. 

Traceability 

Inventory management systems provide traceability of individual components that comprise the whole product. This is achieved through a manual card system and part numbers, or by the use of radio-frequency identification tags (RFID) or barcodes. Whatever system you choose, be it manual or automated, traceability is essential to verify the quality of a product and to rectify any issues that may only become apparent once the inventory has already been shipped. 

Storage 

Storing inventory stock is important as correct storage affects the quality of items. It should be a perpetual aim to produce quality items for customers. This can only be achieved if the quality of every component is maintained - how can you ensure the storage of inventory stock enhances its quality? Investigate the recommended storage conditions for every item and ensure they are implemented. You can also implement usage system that sees to it that all items are used within their expiration dates. 

Process Improvement 

Not only does inventory management keep track of items through the manufacturing process, but it also allows business to track the processes and time taken to complete each step. In short, inventory management helps to streamline processes that are a fundamental component of quality management. By ascertaining where time is being wasted, processes can be improved. If the time between a product being receipted and sold is minimised, it will always improve the quality of the product. 

Saving Time and Money 

Improved processes, through quality management and inventory management, will result in savings across the board including time and money. This, of course, frees up more of these two vitally important commodities to invest back into creating a quality product and improving business operations - which can only be a good thing. 

Inventory control and quality control combine to create efficient, profitable businesses that provide quality offerings to their customers. We all know that happy customers are more likely to be repeat customers and positive customer experiences lead to positive word of mouth.

Producing steady and consistent quality products and services for your customers helps deliver your business a strong competitive advantage. This can potentially also attract customers away from competitors or lead to opportunities in markets where quality is essential.

Having a quality control system in place can improve customer satisfaction because it ensures you are consistently delivering a superior product or customer service. This in turn, helps build brand loyalty as customers have the confidence that you will continue to offer reliable performance in the future. 

The overall question remains, ‘how can businesses achieve this’ – we explore that next, with a framework to ensure accurate inventory and quality control. 

Managing inventory and quality in isolation often leads to blind spots - to overcome this, businesses need a unified approach that integrates Inventory Control (IC) and Quality Control (QC) into a single performance framework. This scorecard not only tracks operational efficiency but also quantifies the Cost of Poor Quality (COPQ), enabling managers to make data-driven decisions that reduce waste and improve profitability.

Why Integrate IC and QC Metrics? 

• Holistic Visibility: Combining IC and QC KPIs provides a complete picture of operational health, reducing silos between production and inventory teams.
• Cost Transparency: COPQ often hides in fragmented processes, such as excess stock due to poor QC or damaged goods from poor IC. A unified scorecard exposes these costs.
• Continuous Improvement: Integrated metrics allow businesses to identify root causes and implement corrective actions faster.

Key Components of the Scorecard 

Inventory Accuracy (%) 

• Measures how closely recorded inventory matches physical stock.
• High accuracy reduces stockouts and overstocking, minimizing waste.

Stock Turnover Rate

• Indicates how efficiently inventory is moving through the system.
• Low turnover may signal quality issues or poor demand forecasting.

Defect Rate (%)

• Tracks the percentage of products failing QC checks.
• Directly impacts rework costs and customer satisfaction.

Rework and Scrap Costs

• Quantifies expenses from correcting defective products or discarding unusable stock.
• Links quality failures to financial impact.

Obsolete Stock Value

• Calculates the cost of inventory rendered unsellable due to poor QC or expired shelf life.
• Highlights the importance of proactive quality checks and storage conditions.

Step-by-Step Framework for Implementation

1. Define Metrics and Data Sources 

• Use inventory management software (e.g., Unleashed or alternative) to capture IC data.
• Integrate QC data from production systems or ERP modules.

2. Calculate COPQ

• Include costs from damaged goods, rework, obsolete inventory, and customer returns.
• Express COPQ as a percentage of total operational costs for benchmarking.

3. Create a Unified Dashboard

• Leverage cloud-based inventory platforms to visualize IC and QC KPIs in real time.
• Enable drill-down analysis for root cause identification.

4. Set Targets and Thresholds

• Align IC and QC goals with business objectives (e.g., reduce obsolete stock by 15%, defect rate below 2%).

5. Review and Improve 

• Conduct monthly scorecard reviews.
• Implement corrective actions and track improvements over time.

Benefits of the Integrated Scorecard

• Reduced Waste: Lower obsolete stock and scrap costs.
• Improved Customer Satisfaction: Consistent quality and timely delivery.
• Enhanced Profitability: Better resource allocation and fewer hidden costs.
• Strategic Decision-Making: Data-driven insights for long-term growth.

Streamline your operations and reduce the cost of poor quality with Unleashed Inventory Management Software. Gain real-time visibility, automate processes, and integrate quality control into your inventory workflows. 

Try Unleashed with a 14-day free trial to see for yourself.