Through this guide we will talk about the periodic and permanent inventory system, advantages and disadvantages of these two systems widely used in companies. In any case, if you are not aware of what an inventory is, it is recommended that you first inform yourself about what production planning and inventory control are.
The advantages of a centralized inventory control system are something worthy of analysis, but also the methodology that we will apply in terms of periodicity is something that you must take into account.
periodic inventory
The periodic inventory is one in which the evaluation or inventory is carried out from time to time. This type of inventory can be done in various periods, such as monthly, semi-annually or even annually. The constancy with which the inventory is carried out will depend on the statutes of the companies.
The fact that the inventory is carried out from time to time means that it cannot be accessed until the procedures are completed. This type of inventory is usually complex, since an evaluation of all the elements is made. The foregoing usually means that making a periodic inventory is an exhaustive and demanding task for the company.
permanent inventory
A perpetual inventory is one in which a constant inspection is carried out. In fact, in this type of inventory practically all the movements of goods of the company are evaluated. The main characteristic of this inventory is that at all times there is certainty of the company’s raw material.
The best way to apply perpetual inventory is by using a computer system or organization systems. Thanks to this system, every movement made in the company will be stored and can be viewed at any time.
There is talk of a constant count, which is nothing more than the updates that are made to the inventory. It is a system that presents various utilities, the main one being that the information is there at all times.
Advantages and disadvantages of periodic inventory
The biggest advantage of periodic inventory is that it can be applied very easily. In fact, the advice or tutoring to do it is not so complex, since everything is done manually, in other words, no greater skill or experience is required.
This type of inventory does not include extra technologies or developed computer systems. Therefore, it could be said that its cost is relatively lower. This makes periodic inventory the best method to use to carry inventory in a small clothing store or business.
Advantages and Disadvantages of Perpetual Inventory
The biggest disadvantage of perpetual inventory is that it requires a complex and functional system. This often leads to extra expenses, that is, to invest specifically for the purpose of carrying out inventories in the company.
Similarly, the fact that another tool is used implies that prior tutoring is required. This means that experience is needed in order to handle the tools to carry out a permanent inventory. In fact, on many occasions an extra employee/employees will be required to carry out these operations.
Even so, the advantages of permanent inventories are also noteworthy, the first of which is real-time information. As we pointed out before, with a permanent inventory there is the possibility of accessing the inventory information at all times. This is very useful, since we will be aware at all times of how the movements are going.
The fact of being constantly aware of stocks can be very useful in the event that our business is dedicated to sales. At all times we will know the existing stock, so we can give an immediate response to our users/customers.
Finally, perpetual inventory avoids the tedious processes that often exist with periodic inventories. In other words, you don’t go through that annoying inventory process every so often.
Undoubtedly, establishing policies and procedures for inventory control in a company is essential, so it is good to take into account all the principles of an inventory, whether periodic or permanent.
