How can you use periodic inventory systems more effectively?

1 Choose the right frequency

One of the most important decisions you need to make when using a periodic inventory system is how often you will count your inventory. This depends on several factors, such as the size and complexity of your inventory, the turnover rate, the demand variability, and the cost of counting. Ideally, you want to balance the accuracy and timeliness of your inventory data with the resources and time required for counting. For example, if you have a large and diverse inventory with high turnover and demand fluctuations, you may want to count more frequently than if you have a small and stable inventory with low turnover and demand. You can also use a cycle counting method, which involves counting a subset of your inventory more frequently based on its value or importance.

2 Prepare for the count

Another key aspect of using a periodic inventory system effectively is preparing for the count. This means ensuring that your inventory is well-organized, labeled, and accessible before you start counting. You should also clear any pending transactions, such as sales, purchases, returns, or transfers, that may affect your inventory levels. Additionally, you should assign roles and responsibilities to your staff, provide them with clear instructions and tools, and schedule the count at a time that minimizes disruption to your operations. By preparing for the count, you can reduce the errors and inefficiencies that may occur during the process.

3 Record and reconcile the data

Once you have completed the count, you need to record and reconcile the data. This means entering the physical count results into your inventory system or spreadsheet and comparing them with your previous records. You should also identify and investigate any discrepancies or anomalies, such as missing or damaged items, overstock or understock, or incorrect values. You may need to adjust your inventory records to reflect the actual count, as well as your financial statements to account for any inventory changes. Moreover, you should analyze the data to find the root causes of any inventory issues and take corrective actions to prevent them from recurring.

4 Optimize your inventory policies

Finally, you can use a periodic inventory system more effectively by optimizing your inventory policies. This means setting and reviewing your inventory parameters, such as reorder points, reorder quantities, safety stocks, and lead times, based on your inventory data and demand patterns. You should also monitor and evaluate your inventory performance, such as inventory turnover, fill rate, stockout frequency, and carrying costs, and look for ways to improve them. By optimizing your inventory policies, you can achieve a better balance between inventory availability and inventory costs.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?