Inventory Management 5 min read
A Closer Look at Perpetual Inventory System
September 9, 2021 by Srishti Arora - 5 min read
- What is the Perpetual Inventory System?
- How Does Perpetual Inventory System Work?
- Benefits of Perpetual Inventory System
- How to Optimize Overall Inventory Management With 3PL Fulfillment Providers?
- Final Thoughts
For any system to run appropriately, it is essential to have a process in place. If there is no systematic order, there are chances that there will be misses and delays. Since inventory management is a critical aspect of your e-commerce fulfillment supply chain, an inventory management system drives the whole process smoothly.
There are several types of inventory management systems that you can adopt if you want to manage your inventory efficiently. The perpetual inventory management system is one such process that can help you streamline your operations and also reduce costs.
Let’s look at the perpetual inventory management system and how it can benefit your e-commerce business concerning the fulfillment supply chain.
What is the Perpetual Inventory System?
The perpetual inventory system is an organized order where the data is recorded in real-time when stock is sold or received. This automates the process to a large extent, and it is an efficient way to record any changes in the inventory during a transaction.
For example, suppose you have 1000 units of product A, and in a minute, you receive 200 orders of the same product. In that case, the perpetual inventory system will enable your entire process to reduce the number of stocks that have been ordered from your master inventory.
This is also highly beneficial if you have decentralized your inventory and stored it in different locations.
How Does Perpetual Inventory System Work?
Inventory Level Update via POS
The first step in a perpetual inventory system is the point of a sale system update. Sure, the inventory management system mediately applies the transaction to the main inventory across all channels whenever a product is sold. It is made possible with the help of barcodes and RFID scanners.
Cost of Goods Updated
The next step is calculating the cost of goods sold. Via the perpetual inventory management system, this value gets recalculated and is updated across channels for a systematic inventory valuation.
Reorder Points Adjusted
Based on the previous data, up the perpetual inventory system automatically update the reorder points based on the increase or decrease in sales so that you have an optimum inventory level at all times.
Purchase Order Generated
With an automated perpetual inventory system, if the item or SKU has hit the reorder point, the system generates a new purchase order and sends it to the supplier.
Received Products Added to Inventory
The products are received and added to the inventory based on the purchase order generated after the warehouse employees check.
Benefits of Perpetual Inventory System
Real-Time Data Recording
When data is recorded in real-time and updated across channels, it avoids confusion to a great extent, and decisions can be made faster. It educates the seller about the current situation and helps them make informed choices. It also reduces delays as all the information is available directly in hand, and there is no dependency.
The perpetual inventory system collects all information at a minute level across your e-commerce supply chain. This data gives you more insights about roadblocks and any bottlenecks in the procedures that can also help you audit the whole process better and make changes wherever necessary.
Reduction in Inventory Management Costs
The holding costs and replenishment spends are reduced as you get real-time updates, not left to the last minute. As the entire process is more planned and organized, it saves on labor costs and avoids errors.
Accurate Demand Forecasting
With real-time data, demand forecasting is more accurate and realistic. As the trends change by the minute, real-time data can help you analyze information much more straightforwardly and make more insightful decisions for your business.
How to Optimize Overall Inventory Management With 3PL Fulfillment Providers?
Even though a picture inventory system may sound like a solution to most of your inventory management problems, it can still be a little costly to set up. I’m not just that. It will also require constant maintenance to ensure that the product is up to date and does not hinder the e-commerce supply chain. Hence, it is an intelligent decision to outsource your inventory management with 3PL fulfillment providers. As fulfillment providers have a robust warehouse infrastructure and a text tag dedicated to only managing your incoming orders, they have the necessary process in place.
Shiprocket Fulfillment is a 3PL fulfillment provider that can help you reduce inventory management costs and deliver products 3X faster. We have fulfillment centers across eight prime locations in the country, and more will be added soon. These enable Shiprocket fulfillment to provide you with an end-to-end fulfillment solution that allows order management, inventory management, order processing, and shipping.
Not just that, by outsourcing operations, you can also focus on other aspects of your business like marketing, innovation, research, etc.
The perpetual inventory management system is truly a blessing for the e-commerce fulfillment supply chain. It can be beneficial to streamline the process, reduce cost, and improve the inventory management system. The periodic inventory system took into the picture a lot of manual labor that would lead to errors and delay the process by manifold. With real-time data collection and a perpetual inventory system, you can reduce processing time and improve your business’s order to ship time.