Inventory is the action or process of recording the amount of stock held by a business. There are various techniques of inventory:
1. Periodic inventory
2. Continuous or perpetual inventory
3. Pick accuracy
4. Stock out validation
5. Annual inventory
1. Periodic Inventory
Periodic inventory can be monthly, quarterly or half-yearly checking of the entire stock over one or two days depending on the amount of stock. The method and process followed are similar to an annual inventory i.e. all items of physical stock are counted and recorded on stock sheets or scanned and then compared with the stock validation file.
While inexpensive items may be checked once a year, expensive items or stock with sell-by dates should be checked more regularly.
2. Continuous, Perpetual Inventory
With this system, inventory is done throughout the year as per a pre-determined plan of action. A-items may be counted monthly, B-items counted weekly and C-items counted daily. This means that a perpetual inventorying record for each item is maintained showing all transactions so that validations can be completed.
Investigations with regard to any discrepancies can be spread over the year and therefore correct comprehensive analysis can be achieved. Year-end accounts can also be prepared expeditiously if continuous validation is fulfilled as per a pre-determined plan.
There should be minimal or no impact on the operations of any stores as counting and validation are completed throughout the year based on perpetual stock validation files. Any checks can be completed on a regular basis of perpetual stock reports against the stock validation file and anomalies can be identified quickly.
3. Pick Accuracy
Pick accuracy are checks that a business makes at the time of receiving stock from suppliers and/or while issuing items to store/customer. This is normally completed by picking orders going out to customers or within a warehouse a cage is normally identified. This is where an invoice is present so that checks can be completed on the items going out or coming in against the invoice.
4. Stock Out Validation
This method of stores stock validation is completed when a particular item is out of stock or levels of stock are incredibly low. This type of validation is generally done by in-house staff. The stock out is recorded, reordered and reasons, why the stock out has happened, are identified to ensure the issue is not repeated.
5. Annual Inventory
When periodical inventory or continuous stock validation is not undertaken then an annual inventory is essential. An annual inventory is completed once a year. In certain instances, the warehouse or store may be closed for a few days or the inventory held out of working hours. In other places, the receipts and invoices will be suspended until the inventory is over. As with the periodic inventory, all items of physical stock are counted and recorded on stock sheets or scanned and then compared with the stock validation file
Whichever inventory method you decide is best for you inventory will provide the following crucial information for your business