Every business especially ones, where stock movements are affected, would need to keep a track of all such movements very studiously. Stocks are equity and when they move in and out of the business premises the difference in value between the two would provide either the profit or the loss. That is the core of any business. Generally, it is the profit that should flow in but due to some unforeseen reasons, even losses on some items could be the result.
Every item in stock has to be tabulated with the in and out movement carefully recorded. Prior to the 1970s and the advent of computers and online systems, these stocks were monitored manually. Stock cards were used for every single item and the in and out movement was recorded on it. It was quite a tedious exercise. Though stock cards were updated daily it was necessary to physically count and check stock balances.
This system of periodic stock inventory where stock balances were checked annually especially by grinding the business to a complete halt, was a severe strain on staff and the business itself.
Comparing this periodic inventory system with the advantages of perpetual inventory systems is like chalk and cheese. In the periodic inventory system, there is no feedback on what the available stocks are of any item are unless it is cross-checked with the stock card and the physical balance. Doing so for every item if it is a large fast moving consumer goods company could push you to the extreme limit.
We look at some of the advantages of perpetual inventory systems and what it could do to any business small, medium or large.
#1. Prevents Stockouts
The system could automatically generate the stocks to be ordered preventing stock-outs. This would assure that the company would not run short of stocks at any time.
#2. Apprise on customer preference
At the point of purchase customer’s profiles would be automatically collected if they pay by loyalty cards or even by other payment methods. These would be fed into the system to enable to company to put into perspective customer preferences.
#3. Centralize inventory management
The management of the inventory system could be centralized even if they are at multiple locations. Stock movements could be monitored at any time and the management could study the movement of any item at any location.
#4. Maintain accuracy
Accurate stock control can be affected with complete accuracy maintained. Stocks could be checked at any time which is a major advantage of perpetual inventory systems.
#5. Provide valuable feedback
Stock movement feedback is available at the fingertips, from which a host of information could be derived depending on the software that is being used. Every step of the inventory control from what is ordered, to their expected arrival dates, stock in hand and many other aspects could be easily retrieved.
#6. Streamline the ordering process
The ordering system would also be streamlined which would be tabulated and the orders sent out at regular intervals. This would ensure that the optimum stocks would be available for sales and no item would be unavailable for the customers.
#7. Total equity at the fingertips
The advantage of perpetual inventory systems is that the company could tabulate all aspects of its business. The stocks, receivables, creditors and every other aspect pertaining to the business and the equity could be retrieved in a matter of seconds. This provides the management to ensure that optimum profitability is sustained.
The above are just some of the advantages of perpetual inventory systems which could help any business to save on time, and increase in profits. The management should have the relevant information at their fingertips and only then could they streamline operations. Bottlenecks in the system should be eliminated and once that is achieved time would be saved and productivity could be increased.
Companies having stock movements should prudently see the advantages of perpetual inventory systems. If they do and implement the system best suited for them they could reap rich benefits. Hence every company small, medium or large should implement and enjoy the advantages of perpetual inventory systems.