What is a perpetual inventory system?

A perpetual inventory system, sometimes called a continuous inventory system, is a method for managing inventory with real-time updates about what a facility has on hand. The system is updated right when materials come in or when an order goes out, consistently reflecting accurate inventory information. Perpetual inventory systems are the opposite of periodic systems, a management strategy that relies on intermittent checks of inventory levels rather than keeping the system continuously updated.

There are a number of benefits that come with implementing a perpetual inventory system. Those in charge of restocking supplies and materials will be able to submit orders that are accurate and ensure the facility has exactly what they need and when they need it. This system can also make it easier to track sales trends which can in turn help make decisions and adjustments to pricing, advertising, etc. Perpetual inventory systems also minimize the risk of theft, keep financials accurate, and can even make for easier regulatory compliance.  Overall having an accurate and updated inventory system will affect many areas of the company, improving both the organization and the bottom line.

Perpetual inventory systems could be carried out with just a pencil and a piece of paper, but with advancements in technology and manufacturing it has become much easier to implement a sophisticated system. One option is utilizing custom barcoding tags that when scanned, immediately updates inventory levels electronically. This tracking system is particularly beneficial for companies with large warehouses or multiple locations. You can track materials or a product as it travels through the production process, knowing exactly where it is at any time. Although the concept of continuous inventory systems is relatively simple, implementation may take a bit of time and effort. However, once you get over the initial development, you will see it is a system that is well worth the results it yields.

 

Similar Questions

Additional Resources

Lean Manufacturing Guide
 
Lean Manufacturing Powerpoint
 
Other FREE Resources:

Unable to play video? Click here