What Is the Most Popular
Inventory Management System?
Inventory is an essential part when you start or even think to start a business because all of your business is based upon how your inventory is being dealt with. Recording the stock as soon as it comes in, and keeping the right track of all your stock till it is supplied to the customers is an essential part of your business’s operations. Inventory is mostly of three types;
- Raw materials.
- Work-in-process inventory.
- Finished goods.
However, MRO (maintenance, repair, and office supplies) is also a type of inventory, but very few people are aware of this. In addition to this, if you are dealing in various products, you must be aware of their status, when to stop the order or when to re-order your stock. An inventory is said to be the backbone of a business, therefore it can make or break your business at a glance.
What is an Inventory management system?
As we have heard above about inventory (also known as stock), now you will easily understand what an inventory management system exactly is. All the elements and operations related to your inventory when combined, form a complete system that will keep track of your inventory and you will be informed where the improvement is being needed. This system of understanding the stock levels of your business is termed an inventory management system.
Moreover, it is very essential to choose the correct inventory system for your business, because any slight miscalculation or mistake in the record-keeping could turn your whole business upside down. YES! No one would ever risk the shutting down of his business right? Therefore, you must use a system that is suitable for the nature of your business. It can cause you a little time to think but it is totally worth it. In addition to this, if you make the right decision and employ a perfect inventory management system for your firm, your business will earn at the level of the sky.
Now it is very important to utilize and install the correct ad suitable inventory system for your business. The main thing that you look into is that it could handle your stock effectively and alert you from time to time whenever there is any threat or risk to your inventory. There are two types of inventory management systems that are most commonly used in the business world.
- Perpetual inventory management system.
- Periodic inventory management system.
Perpetual Inventory Management System:
A perpetual or JIT (Just-in-Time) or continuous inventory management system is the most common and widely used system in all businesses. It is called the Just in time system because it helps you to take the action at the right time when needed. Under a perpetual inventory management system, you are able to record all of your purchases and sales just when they are made. There is no delay in the record-keeping book of your business. Installing a perpetual system will automatically update the amount of your stock after entering the purchases and sales of the products.
Moreover, an inventory management tool like Inventooly can help you to guide well in terms of improving the quality of your products. You would be able to know which product is being demanded mostly by the customers so that you can stock them up.
There are numerous advantages of utilizing a perpetual inventory management system for your business, some of them are discussed below:
- Actions are taken at the right time:
Perpetual inventory system when used helps you to make the right decision at the right time.All the entries related to your business’s stock are being made at once, which guides you well as to which stock is to be preserved and which should be eliminated.
- Every sale and purchase is recorded at once:
Another benefit of using a perpetual inventory system is that all of the sales and the purchases made by the clients or the business itself are recorded simultaneously without any delay. As we are aware that delay in recording just creates chaos in the business at the end of the year or even a month. Therefore, you will be able to track your inventory level after each sale or purchase is made.
- No delay in checking inventory:
Whenever the owners or shareholders of your business ask for the inventory report or suddenly inform you about visiting the storage houses, you are at complete ease. Because all of your stock is being checked, revised, and updated already. So there is no confusion or chances of mistake when the actions are being taken at just the right time. Therefore, a perpetual inventory system helps you a lot in checking the levels of your inventory and report them anytime you want.
- Give owners a correct picture of customer’s demands:
As we know that customer demand plays a crucial role in the success of any business. So a perpetual inventory management system when used, helps you to understand what the customer truly desires. Wonder how? You can simply check the records of the sales of your inventory, by which you will be able to see which are the most selling products. This will help you in enhancing the variety as well as the quality of those products.
- Accuracy in recording inventory increases:
A Perpetual inventory management system enables you to record the data right when the transaction has occurred. This eliminates the risk of mistakes or errors in any part of your inventory because no delay has occurred.
Moreover, when at the end of the accounting period (one year) when you allot bonuses to the employees and check your annual profit, there will be no risk of error in your income statement. Using a perpetual inventory system for your business eradicates all these threats regarding your inventory.
Periodic Inventory Management System:
As we have studied above an inventory management system when installed helps in enhancing the business activities at a very high level. Another type of inventory management system that is used by businesses is called the Periodic inventory management system. It is entirely different from that of the perpetual inventory system. Because in this type, all the calculations of inventory are being done at the end of the year.
However, your purchases are being recorded at the time only, but increase and decrease of your stock levels and all sales are seen at the end of the year or a month.
The periodic inventory management system is also very useful when you are running a small or medium-sized business because the sales and purchases are not too high. Some of the benefits of this system are stated below;
- Less Expensive:
If we compare this system with the perpetual inventory system, it is cheaper to install and much easier to operate as well. Wonder why? Because it is not used frequently other than the end of a specific period of time. You are at ease in not spending maintenance costs on the regular basis and checking whether your periodic inventory system is working accurately or not.
- Suitable for Every Size of Business:
When we talk about the size of businesses, a periodic inventory system is suitable for every size of the business. You should not be worried even if your business is too small or even too big to operate. All the calculations are done at the year-end and you are free of stress throughout the year of maintaining regular records of the business.
- Regular Workings are not Disturbed:
Under a periodic inventory management system, you would be able to manage the regular workings of the business very easily. All the other activities of your business are carried on regularly without any interruption like dealing with the customers, inquiring about what is new in the market, etc. you are relieved of checking up on your business’s inventory regularly.
- Purchases are Recorded More Accurately:
When you employ a periodic inventory system in your business, all the purchases are being recorded just at the right time. There is no continuous and simultaneous recording of the profits and losses, therefore all of your focus can be just on the purchases of your business. No risk of miscalculation or mistake in the purchases occurs at the end of your accounting year. Moreover, it will also help you to accurately understand the demands of your customers.
“Inventooly” as your inventory management system:
Another most frequently used inventory management system is known as “Inventooly”. The main purpose of this inventory management system is to provide its customers the easiest way of integration with the inventory of the business for managing it effectively.
In addition to this, using inventooly as your inventory management system could help you to a great extent for making accurate future predictions regarding your business’s inventory. Moreover, it also enables you to be updated in case of each and every single transaction to avoid any problem in the future.
There are two basic types of inventory management systems in every business; perpetual inventory system and periodic inventory system. A perpetual inventory system will let you record the purchases and sales of your business just when they occur. Which in turn helps you to make important decisions regarding your business’s inventory. However, on the other hand, a periodic inventory system will only record purchases at the time and all other inventory-related data is observed and estimated at the end of the year or a month.
If we talk about the most widely used one, the perpetual inventory system is preferred over the periodic one. Because it enables the business owner to be informed with every single detail of the inventory which helps in making important decisions. Using a proper inventory system for your business will help you to improve the workings of your inventory and also it will make you target a large portion of the audience by fulfilling their demands at the right time.