A perpetual inventory system, also called a continuous inventory or perpetual stock system, is a type of inventory management system that relies on inventory information to be precise and updated in near-real time. Not only will this type of system help managers to accurately track inventory, but it also simplifies ordering, restocking, and other related tasks.
The concept is simple: track and update inventory quantity and availability to keep operating functions running smoothly. Smaller organizations can practice this inventory system usually with a just a pen and paper, but larger companies typically opt for a system utilizing barcodes or RFID tags. Barcodes are placed on products and items and scanned as they come in and out of the facility and as they move through departments. Simply scanning the code will in turn automatically update the system. Companies can then easily track inventory as it moves through the company, ensuring they can always know what inventory is on hand and where it is located.
While a perpetual inventory system enhances the tracking of a company’s inventory, there are several other areas in the business that can benefit from this system. The continuous inventory system makes it much easier to manage restocking and ensure reordering is precise. Long term, the system is a useful tool for tracking sales trends, which can be used to help with adjusting prices, advertising, and other business decisions. Having accurate data for inventory can also greatly benefit the accounting department.
There are several methods of implementing a perpetual stock system and managers will need to evaluate each option to choose one that will be a good fit for their facility. Setting up a continuous inventory system in an organization can be challenging and time consuming, but long-term management of the system is typically minimal once it is implemented. No system is perfect, and it would benefit a company to continue scheduling an annual physical inventory audit alongside the perpetual stock system to ensure accuracy.
Similar Glossary Terms
- Inventory Management
- PFEP (Plan for Every Part)
- Material Flow
- Strategic Planning Process
- The Toyota Way
- SCM (Supply Chain Management)
- Key Performance Indicators (KPI)
- Hoshin Kanri