What is a perpetual inventory system?

Find out how a perpetual inventory system can offer real-time updates of your stock levels whilst removing the risk of human error.
March 1, 2022
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5-min read

A perpetual inventory system is an inventory management method that gives real-time updates of when stock is sold, received or returned. Let's try a real-life example. If you own a plumbing supplies company and you sell a radiator, your system will immediately record this sale and update the number of radiators that are still in stock. Basically, perpetual inventory systems record all stock fluctuations, automating what would otherwise be an exceedingly cumbersome task.

Perpetual inventory systems are now the standard throughout the wholesale and retail industry. From physical grocery stores to online wholesalers, companies across the globe have embraced this automated stock management method. It has replaced periodic inventory systems, a method by which companies had to carry out regular physical counts to maintain stock records. Read on to find out how it works and a few of the benefits.

How does a perpetual inventory system work?

It's important to note that perpetual inventory systems are not based on physical stock reviews but on electronic records. Of course, to have an electronic record in the first place you must carry out a physical inventory count. This will give your system a baseline that will be updated automatically as you sell or receive stock.

Multi-location stock management systems work alongside perpetual inventory systems to allow you to track changes to your stock count in real time, regardless of which warehouse depot it is stored in. This means that you can manage your inventory levels online at any time.

How can I benefit from a perpetual inventory system?

By having access to real-time data, you will be able to make informed decisions regarding your stock levels at all times. This will optimise your inventory management and in turn reduce holding costs. On top of that, it will minimise the need for physical stock counts, saving you valuable time and freeing up staff for other tasks. With a perpetual inventory system, the dreaded end-of-year inventory balances will be calculated automatically - no more struggling your way through Excel's sum function.

But perhaps the most important benefit of perpetual inventory systems is that they minimise human error. Unless stock is stolen or damaged, your stock balances will always be accurate. And if an error does happen, it will be easier to identify it and find out what has happened. For example, you might notice that the item count between your warehouse and the shop floor does not add up to the one showing in your system. Once this has been flagged, you can investigate the discrepancy by carrying out a physical inventory count.

Remove the risk of human error

With OGL's stock management solution, you can run perpetual inventory checks on an ongoing basis, improving the accuracy of your data and minimising human error.

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