N41 Web Blog MAR 022722

What are Perpetual Inventory Systems?

Inventory management is a critical part of any business, yet it can be difficult to get right. Likewise, there are many different inventory systems, and it can be hard to decide which one is right for your business. As a result, many business owners turn to a perpetual inventory system because it is well-rounded and efficient. This article discusses aspects of the perpetual inventory system, including how it works, its benefits and why you should consider implementing this system for your business.

man and woman in Wearhouse

What are Perpetual Inventory Systems?

Perpetual inventory systems use a program to “perpetually” estimate inventory by electronic records. It’s very different from the cumbersome periodic inventory system that uses physical methods to base inventory counts and levels.

The perpetual system begins by taking a baseline from a physical count. Then, it takes this information and continually updates the electronically stored inventory-based transactions, such as purchases and returned items going in and shipments going out.

Inventory in a perpetual inventory system is typically updated the moment they occur by using inventory management software tools and warehouse processes. For example, operators can use barcode scanners and labels to record transactions, such as receiving, putaway, picking, purchases, sales and other adjustments in real-time.

The operators then upload this information into a database that continually tracks these changes and updates the inventory. This perpetual updating of stock gives the system its name and sets it apart from traditional, periodic systems.

Who uses Perpetual Inventory Systems?

Anyone from mom-and-pop stores to Fortune 500 companies to leading fashion houses uses perpetual inventory systems. These businesses can take the recorded information from the system to generate insightful reports that show the age of the inventory, status of the stock, the costing of products and much more. These reports can help businesses make informed decisions on inventory and other aspects of the business.

woman taking stock

How Perpetual Inventory Works

When using perpetual inventory, the point-of-sale (POS) system and other inventory management software tools automatically update the inventory records when a transaction occurs.

For example, suppose you sell an item on your eCommerce website. In that case, the POS system will record this information to reduce the number of items in stock accordingly. This real-time updating of inventory ensures companies have accurate information about their products at all times.

With perpetual inventory, you don’t have to wait until the end of the day or week to get an accurate picture of your stock levels, either. Instead, you can view this information in real-time and make better decisions about what items need reordering from suppliers and when staff needs replenishment for customer orders.

Benefits of Perpetual Inventory Systems

The benefits of perpetual inventory systems are many and varied. Some key benefits include the following:

  • Real-time updates: As mentioned before, with a perpetual inventory system you have real-time updates of your stock levels. This information is crucial for making informed decisions about what items to order from suppliers and when staff needs to be replenished for customer orders.
  • Inventory accuracy: Since perpetual inventory systems use a program to perpetually estimate inventory, it results in greater accuracy of stock levels. This is especially beneficial for businesses that sell items both online and in physical stores.
  • Easier tracking of sales and profits: The perpetual updating of stock also makes it easier to track sales and profits. With this information, businesses can identify which items are selling the best and make better decisions about what to stock in the future.
  • Easier to find misplaced inventory: Perpetual inventory systems also make it easier to find misplaced inventory. This is because all of your stock information is stored electronically in one place.
  • Less investment in materials: Perpetual inventory offers cost savings in many ways, including less investment in materials. With accurate stock information, businesses can order the correct quantities of goods from suppliers, preventing over-or under-ordering.
  • Eliminates human error: The use of inventory management software tools and other automated processes eliminates human error. This means that there is less chance for mistakes to be made when it comes to updating inventory records.
barcode scanner

How Perpetual Inventory Systems Relate to Enterprise Resource Planning Systems

Enterprise Resource Planning Systems, or ERP systems, are comprehensive software suites that manage various aspects of a company’s operations, including inventory. ERP and perpetual inventory systems can work together to provide an even more accurate picture of your stock levels.

When integrated, the two systems can share data about products, customers and suppliers. This information helps you make better decisions about what to order, when to order, and how much to order.

ERP systems can also manage your finances, human resources and other important areas of your business. If you’re looking for a comprehensive system that can help you manage all aspects of your company, then an ERP system is a good option.

Contact N41 for Your Fashion and Retail ERP Software Needs

If you’re looking for a fashion and retail ERP system, N41 offers a wide range of software solutions and features that can help you automate inventory and manage your purchases, streamline your operations and transactions, integrate with other solutions and more. To learn about how our products and services can help your business, you can request a demo or contact us today at (213) 738‐1010 to talk to one of our representatives. We will be glad to talk to you and help you determine if a perpetual inventory system combined with N41’s ERP solutions is the answer to your business needs.

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