Inventory counts

Perpetual, yearly or rotative inventory counts?

10 September 2018

Do the following to ensure your company’s stock is adequately managed:

  • Label items so all have the correct product reference.
  • Set up good signaling.
  • Correctly organize all item families and sub-families: store all different stock types properly.
  • Plan your physical inventory taking or counts, whether they are perpetual, yearly or rotative.

What does inventory counts entail?

A book inventory must be applied in all logistics businesses. Other than the obligatory book inventory, current legislation also makes it mandatory to do a physical inventory at least once a year. This operation consists of a manual recount of all the stored products and goods, and is often done under the supervision of the supply chain manager.

The physical –or manual– inventory taking is particularly handy when comparing registered stocks in the Warehouse management system to the actual warehouse stock. Thanks to physical inventory taking, companies can detect discrepancies, such as logistics errors. In other words, errors from signaling, reference numbers, picking, etc.

What inventory types are there?

Whether in logistics or another sector, each organization is free to carry out its physical inventory as often and using the methodology that works for it –observing a minimum yearly inventory. Recount all stored items or only certain classes of items perpetually, yearly or rotatively.

1. Perpetual inventory

Your business needs this method, also called computerized inventory, if you want to know your stock levels in real-time.As each stocked item enters and exits, the computer registers available in-stock counts: the quantities that flow in and the final stock or the quantities that go out and the remaining stock.

Even though its application isn’t always easy and requires company resources, especially when the number of items a/o stock rotation is high. Thanks to this physical inventory type your stock management will be correct and will match actual stocks.

As seen in the article The advantages of intelligent warehouse management, if you have a wide range of SKUs, this business practice will be highly-useful and play an integral part of the warehouse management system.Plus, it provides open-ended viewing of available goods amounts to avoid stock-outs and, as such, potential problems with customers.

2. Yearly inventory

As the name says, yearly inventory is done, just that, once a year to confirm the results of the book inventory.

This operation can be very tedious. In fact, since it is done just once a year, you need to properly train and get your staff ready to prevent huge differences in your real stock compared to your book inventory numbers.Plus, you should give yourself several days to complete the operation, if your warehouse is big and holds many SKUs.

3. Rotative inventory

If the two inventory types mentioned beforehand haven’t convinced you of how challenging it can be -financially and in workforce allocation- to implement them, surely rotative inventory will.Companies sometimes choose to carry out periodic, planned recounts of one or various portions of its stored SKUs, several times a year.

This practice yields many advantages for a company, such as:

  • Prevent stock-outs: like in permanent inventory, this technique lets you have a general, on-going overview of your stock.
  • Regularly update available stock quantities and avoid dragging out stock input and output errors over long periods.
  • Less challenging to implement than permanent or yearly inventories.

It is vital to accurately assess your needs even before choosing what physical inventory you want to run in your warehouse. And, if the inventory method that you use isn’t getting the job done, nothing is stopping you from changing your approach.