Perpetual inventory and Fraction ERP
One thing that I have learned over the years is that perpetual inventory approaches often provide better responsiveness to customer demand and management decision making than infrequent stock taking exercises.
Many businesses run a combination of these approaches, because of the benefits associated with both methods.
Perpetual Inventory, in a nutshell
If you haven't come across perpetual inventory (often abbreviated as PI) approaches, let me summarise it here.
Whereas a normal stock take would have production stopped for a period of time where a large group of staff count every item in the business, perpetual inventory looks to do this on a 'little and often' basis. Instead of counting everything at once, you devise a programme that aims to count everything over the course of a year (or another time period to suit your business' needs).
Stock adjustments within Fraction ERP
Classify your parts
High value, high frequency, high risk items would be counted frequently and low value, low risk items would be counted infrequently.
High risk might denote long lead times or low volume of suppliers associated with the part. Low risk items would likely be easy to replace / substitute or be easy to obtain from alternative vendors.
From here it is likely that you would introduce a daily count with specific items based on their value and risk. This might mean that each day you count a handful of high value / high risk parts, a couple of medium risk items and one low risk item, updating your system as you go. No more waiting weeks or months to find out that you are going to run out of stock. This is a responsive approach to stock management and can improve management decision making. Of course, knowing why your stock levels have changed is a great opportunity to improve your business processes, training and management approach!
Perpetual Inventory in Fraction ERP
We have embraced the perpetual inventory approach when we designed Fraction ERP. In the video below, you can see our simple approach to stock management.
If you are still running infrequent stock takes in your business then I urge you to consider the benefits of counting the high value, high frequency, high risk parts on a regular basis. Even adopting this approach for just a handful of key items in your business should bring assurance and improvement to how you supply your customers and production lines.
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