June 9, 2015

What is a perpetual inventory system?

A perpetual inventory system is a way of tracking inventory in real-time. It accounts for sales, manufacturing, stock transfers and purchases at the time of transaction, adjusting inventory levels as they change. It is considered a must for businesses that manufacture goods, though it is widely used by all industries. 

While it can be implemented using an inventory card system, it is best utilised with a computerised inventory management platform that uses eCommerce and POS technologies. With inventory carding and similar manual systems, human error is a serious liability.

Perpetual systems do require a large amount of record-keeping, though this can be made significantly easier with the use of an effective automated inventory management platform.

The upsides of a perpetual inventory system

Less manual stock-counts

Businesses that use a traditional periodic inventory system will need to perform regular stock-counts. This often involves shutting up shop and paying staff to manually count all items of inventory, which of course means the loss of sales or an interruption of operations. While an annual stock-count is still required to discover obsolete, stolen or spoiled stock, a business using a perpetual system can operate with a minimisation of manual counts.

Better control of inventory and restocking

One of the challenges for any business operating with inventory is how to best control what is needed, where and when it is needed, and how these processes happen. Perpetual systems have a great advantage over periodic systems in this regard. Inventory levels, product sales and manufactured items are all adjusted in real-time, giving your business an intuitive grasp of inventory operations.

A perpetual system will also facilitate accurate and timely restocking and give a better idea of inventory losses. Knowing when and what to restock is a winning ticket for any business.

Less inventory investment

Perpetual systems are the best solution for businesses looking to run lean inventory levels and free up capital. Lean inventory management techniques like Just-In-Time require an automated perpetual system so stock can be ordered as needed. Inventory investment is one of the main ongoing costs for a business, so the ability to run on a minimum means more capital to use elsewhere.    

Efficient and streamlined operations

The last thing any business wants is to be blind to the shortfalls and weaknesses of their ongoing operations. A perpetual inventory system can aid the big-picture view of the business and enable the ironing-out of weak and inefficient parts of the operation.

Perpetual or periodic?

The decision of which system to use is often an accidental one, especially for small or new businesses. A periodic system tends to be the ‘by default’ choice as it can be added as a necessity without much original set up. Though with the abundance of affordable and easy to use inventory management platforms available, it needn’t be an afterthought. Even for small businesses the use of a perpetual system can provide excellent ongoing solutions that can grow along with the business.