Perpetual Inventory System- why is it important for a business to succeed?

What is perpetual inventory system? Why is it important for a business to succeed?

Inventory is a word that every business person is familiar with as it is one of the most important aspects of running a business. Perpetual Inventory system is one of those management strategies which helps to overcome any deficit in the business.


Inventory is the lifeline of any business, as you need to have enough stock in order to cope with the customer’s demand, and this is where the inventory management system comes into play.

For this to happen, we need to understand what is perpetual inventory system. The Perpetual Inventory System is a very dependable way of tracking all such information in real-time which will keep the stocks as needed for the business.

Let us understand this system step by step-

  • What is Perpetual Inventory System?
  • Why it is important?
  • How to optimize the inventory management system?

What is Perpetual Inventory System? 

What is Perpetual Inventory System

Perpetual Inventory System is an inventory management strategy or method which is used to keep a record of all the stock or inventory transactions, like when the stock is sold or received, in real-time with the help of an inventory management tool or system.

This system is a fully automated one, which records the changes in inventory at every transaction taking place in real-time.

As disused in the above section the perpetual inventory system tracks all the updates and movements in the inventory, as soon as there is any modification in the numbers in real-time. And this is why it is the most trusted and accurate system which gives the exact status of the stock at every instance of the process.

Why Perpetual Inventory System is Important?

As we came to know, what the perpetual inventory system is, let us now understand why this system is important in running a business efficiently. You can even see it as an advantage of a perpetual inventory system.

Here are the top 3 reasons why it is important-

  • It prevents stock-outs – As we discussed earlier that, this system gives us a real-time display of the stock transaction, it helps us to identify when the stock needs to be ordered to prevent the state called out of stock.
  • A clear understanding of customer preferences – This inventory system analyses the demands of the customer by studying the stock movement at any point in time of the process. This gives us a clear idea about the customer’s preferences over a certain product or service.
  • Provides valuable information – such perpetual inventory systems provide valuable information in terms of the purchases & returns by analyzing the schedule of the stock inwards and outwards, and minimizes the errors by reducing the human touch in the system.

As the coin has two sides, there are also some disadvantages of a perpetual inventory system, like scanning errors, breakages, hacking, etc. which can be discussed later in other blogs.

How to optimize the inventory management system?

Now, before we begin, we must understand the word ‘optimize’. Optimizing a tool or a system means, making the best & most effective use of the resource available. 

To optimize such an inventory system doesn’t mean that we only use the resources which are available to us, like a register to just note down the inward and outward. For effective management, we must be ready to make use of IoT (Internet of Things) systems and devices that can assist us in effectively managing the inventory system.

optimize the inventory management system

The use of the right technology and related devices can help us to optimize the inventory tracking system to produce better results from it.

The absence of the right inventory management tool or system can lead us to the delay of the order fulfillment which leads to huge losses and even loss of a valued customer.

Being in a business we must know when to order or release the stocks. As per the process, we should be keeping a list of the standard stock demand according to the requirements by keeping a record of the stock behavior in the past few months.

And that is why a perpetual inventory system is important in a business, as it guides us about the exact scenario of inventory management.

Thus, it is the best solution for businesses, as we can centralize our inventory management system and optimize it according to the needs of our business.

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