What Is One Advantage of a Periodic Review System

To maintain shine operations, business owners and managers must invest in some grade of product monitoring which assesses the menstruation of their goods and services. Failure to review the flow of goods in business organisation could atomic number 82 to potential waste and trading losses which are all hands avoidable with the use of an inventory system.

Depending on the size of the business, managers must determine whether a periodic inventory or a perpetual inventory system is optimal.

In this article, we consider the advantages and disadvantages of periodic and perpetual inventory systems.

Periodic vs. Perpetual Inventory Systems

Traditionally, inventory systems were managed manually past a store manager who took stock of goods at stock-still points in a production cycle. This is considered a periodic inventory method. A modern culling to this is the perpetual inventory system which is continuous real-fourth dimension monitoring of the flow of goods in and out of a business.

While periodic inventories are the cheaper process, conducting one for a larger business might prove to exist an arduous task as it is fourth dimension-consuming and requires dedicated manpower. On the other hand, a perpetual inventory arrangement tin can be faster simply more than costly in some instances.

What Is a Periodic Inventory System?

A periodic inventory simply means taking concrete stock of every single item in stock at a fixed indicate. While this gives an verbal judge of all the products available at the point of stock-taking, it does not account for a continuous, daily estimate.

Periodic inventories can be done once a week, monthly, at the end of every quarter, or annually based on the size of the items in stock. This inventory type is usually conducted manually using a physical or estimator-based spreadsheet.

Pros and Cons of Periodic Inventory

In that location are various benefits and drawbacks of a periodic inventory system are outlined below.

Pros

Lower Start-upwards Costs

Periodic inventory requires very few materials to be properly conducted and this translates to a significantly lower price of setup. This makes periodic inventory ideal for smaller businesses running on a tight budget.

Simplified Record-Keeping Style

The structure of a periodic inventory is very unproblematic and easy to empathize as it commonly shows three bones parameters:

• The number of items currently in stock
• The number of items purchased
• The number of items sold

Having just these three items on the spreadsheet makes analyzing the data and making the necessary adjustments a straightforward procedure.

Minimal Experience Needed to Implement

Due to its unproblematic transmission design, a periodic inventory can be efficiently handled past anyone with a basic knowledge of mathematics. The absence of circuitous technology eliminates the need for specialized training and store managers tin can kickoff operating the system from the kickoff 24-hour interval of setup.

Cons

Diversion of Valuable Man Hours/ Increased Overtime Costs

Using a periodic inventory system requires the dedication of employees to the task of manually counting every single item in the inventory. This volition divert valuable human being-hours that could have been spent in other productive activities to a repetitive task. Too, employers who seek to avert human-hr losses might accept to pay their staff overtime to perform the inventory checks outside official work hours resulting in college overall operating costs.

Higher Chance of Errors

Humans are more error-decumbent than computers and as such are more than likely to make mistakes during the inventory process. Typical errors made during transmission collation include miscounting, double counting, incorrect calculations, and information misrepresentation/incorrect input on spreadsheets.

What Is a Perpetual Inventory Organisation?

A perpetual inventory organization (AKA a continuous inventory system) keeps track of all items sold and restocked in real-time. This system automatically updates available data and notifies operators any time changes occur in their inventories.

The data gathered by a perpetual inventory system is stored in a key hub that can be accessed by an authorized person at any given fourth dimension. A continuous inventory organisation can be facilitated by POS systems, RFID scanners, reckoner software, and barcodes.

Pros and Cons of Perpetual Inventory

The advantages and disadvantages of a perpetual inventory system are outlined below.

Pros

Active Inventory Surveillance

Tracking your inventory turnover in real-time allows y'all accurately predict periods of deficits assuasive you to apace arrange before shortages become detrimental to productivity. In a perpetual inventory system similar vendor-managed inventory (VMI) from DXP, this is 1 of the core VMI benefits.

Seamless Management of Multi-sourced Data

Perpetual inventory management systems plug into a central gathering hub that tin can efficiently collect and interpret data from multiple sources. This makes it platonic for larger operations where multiple locations are being managed.

Predictive Analysis

Information gathered from consumer purchasing habits can be used to predict futurity ownership patterns, assuasive businesses to optimize their inventories for periods of loftier demand too as times of slower sales. This atomic number 82 time reduction in inventory management is one of the main benefits of a perpetual system.

Cons

College Offset-up Costs

Setting upward a perpetual inventory management system is associated with significantly higher costs when compared to a periodic arrangement. This is because a perpetual system requires multiple specialized components (RFID codes, scanners, computer software) that contribute to a high cost of setup.

Still, with the right partner for VMI implementation, higher start-up costs aren't always a given.

Should Your Business Utilise a Perpetual Inventory System vs. Periodic Inventory System?

Having established the benefits and drawbacks to both inventory systems, the choice of management system largely depends on the size of your business as well as the budgetary resource allotment for inventory management.

If yous run a smaller concern with a express budget, a periodic system is the well-nigh ideal system to operate. However, for larger businesses with more upside and less restriction on supply chain investments, a perpetual inventory system is the more efficient pick.

DXP Has Supply Chain Management Solutions for Most Industrial Settings

At DXP, nosotros offering elevation-notch supply chain management solutions to a broad clientele base. Our inventory management services are tailored to your business organisation model, so that the payback for new efficiencies is kept to a minimum. For organizations seeking to optimize how they conduct business, inquire nigh our vendor-managed inventory services.

Contact us online today to learn more about the services we offer.

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Source: https://www.dxpe.com/perpetual-vs-periodic-inventory-systems-benefits-advantages/

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