Inventory is a compulsory operation for all companies, whether small, medium-sized or large. It is used to identify and count products and goods in stock, while drawing up an accurate balance sheet of the financial situation. This process also detects discrepancies between theoretical and actual quantities. Depending on their needs and organisation, companies can choose one or more suitable inventory methods. We will therefore look at the different inventory methods for optimising stock management.
What are the different inventory methods?
1️⃣ Perpetual inventory
Perpetual inventory is based on real-time stock monitoring. Every movement of stock (reception, picking, dispatch, etc.) is updated in the ERP system. This type of inventory is particularly well suited to companies with frequent stock movements or operating in sectors that require precise knowledge of stock levels. This is the case, for example, in the retail sector.
Example. An e-commerce company specializing in technology products receives hundreds of orders a day. These orders need to be delivered quickly. So, the company has opted for a perpetual inventory system to keep track of its stock levels in real time and know exactly how many tablets are available. This type of inventory avoids stock-outs.
2️⃣ Periodic inventory
Periodic inventory consists of carrying out complete stock checks at defined intervals. This can be monthly, quarterly or annually, depending on the company's needs. It's the perfect method for companies that don't need real-time monitoring but still want to have a precise overview.
Example. An SME manufacturing clothing and other textile products produces items to order. It carries out a quarterly inventory in order to anticipate its raw material supplies. The results of these inventories are then used to adjust production in line with stock levels.
3️⃣ Cyclical/rotating inventory
Cyclical inventory, also known as ‘rotating inventory’, involves dividing the warehouse into different zones, which are counted at regular intervals. This method has the advantage of not disrupting daily logistics operations and allows errors or anomalies to be detected more quickly. In this way, stock discrepancies can be kept to a minimum.
Example. In a agri-food industry, some products are more sensitive to expiry dates than others. Cyclical inventory makes it possible to prioritize the counting of time-sensitive products and to check the availability and validity of items more frequently. In this way, the company can considerably reduce losses linked to unsold and out-of-date products.
4️⃣ Inventory sampling
On the other hand, inventory sampling is a method that involves counting a sample of the products in stock. This makes it possible to check the reliability of the data without having to carry out a complete inventory. On the other hand, the results obtained can be used to adjust forecasts or to decide whether to launch a more complete inventory if there are significant discrepancies.
Example. In a car component distribution company, inventory sampling is used to check the reliability of stocks without interrupting business. This inventory is carried out every month. If significant discrepancies are found, a full inventory is carried out.
5️⃣ Year-end inventory
Finally, the year-end inventory, often carried out at the end of the accounting year, is used to count all the items in stock. This method is generally required by accounting standards in order to establish an accurate inventory balance in the financial statements. But it is also an opportunity to check all the discrepancies over the year.
Example. In the cosmetics industry, the year-end inventory is used to record all raw materials (essential oils, active ingredients, foaming agents, etc.) as well as finished products and/or products awaiting delivery (shampoo, shower gel, etc.). The company has therefore chosen to carry out an inventory at the end of the year, enabling it to close its accounts.
How to choose the right inventory method? 🤔
Each type of inventory has its own advantages and can be applied to different companies depending on activity, stocks, requirements... For example, companies with just-in-time operations or frequent movements will prefer perpetual inventory for a better reactivity. However, companies with more stable stock management may choose to carry out their inventories periodically or annually.
Here are some tips for choosing the right inventory method:
- Consider the size of your company and your stocks. Give preference to the cyclical inventory method, which makes it easier to organize the count.
- Evaluate the frequency of stock movements. If your stock moves frequently, opt for a perpetual or cyclical (rotating) inventory.
- Define the level of accuracy you expect, depending on your sector of activity. If you need accuracy: choose to take inventory more often, with a perpetual or cyclical (rotating) inventory.
- Consider the resources available (time, staff, etc.). The best option is a sampling or periodic inventory, which is less labor-intensive.
Permanent, rotating or periodic inventory, our WMS saves you time!
The Satelix Logistics WMS offers optimum flexibility when it comes to stock management, allowing you to carry out several types of inventory, adapted to the specific needs of each company. Whether you opt for a permanent inventory, where stocks are updated in real time with every movement. A rotating/cyclical inventory that allows you to control your items by cycle throughout the year. Or a periodic inventory at set times. The Satelix Logistics WMS is there to support you!
This makes inventory management simpler, faster and more accurate, reducing errors and optimizing the organization of your warehouse. In addition, automatic synchronization of inventory data in the ERP system ensures that information is updated in real time, eliminating delays and transcription errors.
Would you like to optimize your inventory with a high-performance WMS? Our experts are here to help! 😊
✅ We're giving you our top tips and tricks for preparing your inventories!
Because we're aware that inventories can sometimes be stressful and time-consuming, we've decided to create a Special Inventory Report in the second edition of our Scope by Satelix magazine. You'll find all the information you need to make your inventories a success. From the definition of an inventory, to the different types, via a case study. There's also advice and tips on how to manage this logistical operation more effectively.
👉🏻 And as an exclusive bonus: a special Inventory checklist to print out!