• You could use it keep track of what you have in your warehouse and on shelves.
• You could use it to automate purchasing by setting reorder points that will generate a PO whenever inventory levels dip to that point.
• You could use it to calculate the Economic Order Quantity. That amount of product that exactly balances between the cost of placing an order and the cost of holding the product in inventory. A really nifty thing indeed.
• You could use it to automate sales projections based upon actual product trends.
• You could use it to improve your cash flow projections.

• Knowing what should be there is first big step in being able to control shrinkage, usually the single biggest waste for retailers.
• Perpetual inventory management allows you to do small counts of selected products on a daily basis and avoid the expensive end-of-month physical count.
• Automating the purchasing decision through reorder points eliminates expensive inventory management time devoted to what is a relatively mindless task.
• Cash Flow Management can be improved by allowing you to manage levels using inventory turns as a key metric.

• Economic Order Quantity (EOQ). Answers the question "how much should I order?".
• Automatic Reorder Points. Answers the question "when should I order?".
• Inventory Turnover Ratios. Answers the question "do I sell enough of this stuff to justify carrying it?".
• Profitability Reports. Reports that show gross profit by product and product line.
• Email notification if certain parameters are met, such as product levels slipping below the safety stock quantity.
• Shrinkage Reports showing trend information that allows you to recognize which products are becoming a problem before the loss gets out of hand.

My biggest problem as a CFO was by and far controlling inventory. We did not have a perpetual inventory system so even our shrinkage percentage was a big fat guess. Even worse, you knew that some of the products were more susceptible to theft than others, but you were never exactly sure which ones. Counting inventory at the end of a month required shutting down operations and even then we had problems getting good counts.

Perpetual inventory is probably the biggest program you can take on in managing your business processes. But, the potential cost savings are usually just as huge. You won't get it perfect, but you should be able to significantly cut your shrinkage losses by switching to perpetual inventory. My personal rule of thumb is that you should be able to get a minimum savings amount equal to annual product costs times 1%. Bigger payoffs are likely and these savings keep happening year after year.

• Just want to talk about it? Give me a call or drop an email. Contact Information
• Need to consider a customized approach to your inventory management system? I will help you develop your specifications at no cost.