What are the different types of Inventory Systems?

Answered July 12 2019

Facilities typically use one of three kinds of inventory systems: manual, periodic, and perpetual. Although technological requirements and the complexity of implementation increase as you move from the first to the last, efficiency and accuracy are improved as well.

inventory system

Manual Inventory System

In the past, all facilities needed to track inventory manually by counting items in stock. Today, some small businesses that carry low levels of inventory may still use a manual system. An employee essentially goes through the checklist, counts all items, writes down the results, and enters the quantities in a spreadsheet document. This information can then be used to re-order materials as needed.

Periodic Inventory System

Now, periodic systems have become the bridge between manual and perpetual systems. Inventory can be tracked manually and periodically; however, barcoding systems have improved periodic systems a great deal.

Facilities can easily implement a barcode by tagging inventory items. These barcodes are periodically scanned to track the item from its arrival to the facility, throughout its travel or usage within the facility, and its final destination when it is either used in a finished product or consumed.

A central computerized tracking system can then provide routine access to the quantities and all locations of items as well as initiate re-stocking orders.

Perpetual Inventory System

The most sophisticated system delivers real-time data. As soon as inventory enters a facility, is moved, sold, used, or thrown out, the central system is immediately updated.

Radiofrequency identification (RFID) tags play a large role in perpetual inventory systems. Active RFID tags can continuously send data and provide real-time information while passive RFID tags use electromagnetic energy from a reader to transmit data. Data from RFID tags can be sent to a CMMS, giving management transparency into inventory levels that can help them make smarter business decisions.