Different Types of Inventory Management Systems

/ By DSI Marketing TeamMay 5, 2023

Inventory management is crucial for businesses of all types and sizes. One of the key components of effective inventory management is having the right inventory management system in place. This article provides an overview of different types of inventory management systems and explains their pros and cons to help readers choose the best option for their business needs.

Two primary inventory management systems are perpetual inventory and periodic inventory. Perpetual inventory systems involve continuous real-time tracking of inventory levels using inventory management software and hardware, such as barcode scanners and mobile devices.

Periodic inventory systems involve manual physical inventory counts at fixed intervals. Each system has its advantages and disadvantages, and business owners should consider factors such as their business type, inventory types, and volume of inventory movement when deciding on the right system.

Therefore, choosing the right inventory management system can help businesses optimize inventory control, streamline processes, reduce costs, and make informed purchasing decisions.

Inventory Management Systems 101

Inventory management systems are a crucial part of any business that deals with inventory. An inventory management system refers to the process of tracking and managing inventory levels, orders, sales, and deliveries. There are two primary types of inventory management systems: periodic inventory and perpetual inventory.

Periodic inventory systems require manual tracking of inventory levels and involve physical inventory counts at regular intervals. On the other hand, perpetual inventory systems track inventory levels in real time using inventory software and barcode scanners.

Perpetual inventory systems provide a more accurate picture of inventory levels, but they require more upfront investment and may involve a more complex setup.

To determine the right inventory management system for your business, consider factors such as the type of inventory you deal with, the size of your business, and the volume of sales you handle. Choosing the right inventory management system can help streamline your business operations, improve accuracy, and reduce costs.

Perpetual Inventory: Pros and Cons


  • Real-time tracking of inventory levels
  • Accurate inventory counts and movements
  • Enables businesses to make informed decisions about purchasing and restocking
  • Reduces the need for physical inventory counts
  • Helps prevent stockouts and excess inventory


  • Can be more expensive to implement, as it often requires inventory management software and hardware such as barcode scanners
  • Requires more ongoing maintenance and training to ensure accurate data entry and tracking
  • May not be suitable for smaller businesses with fewer inventory items
  • Can be more complex to set up compared to periodic inventory systems

Periodic Inventory: Pros and Cons


  • Less expensive and easier to implement compared to perpetual inventory systems
  • Suitable for smaller businesses with fewer inventory items
  • Less maintenance is required, as physical inventory counts are only required periodically
  • Can help identify and address any inventory discrepancies


  • Inventory counts are only updated periodically, which can result in inaccurate inventory levels and stockouts
  • Can be more time-consuming and labor-intensive due to the need for physical inventory counts
  • May not provide real-time information on inventory movements and levels, making it harder to make informed purchasing decisions
  • Limited in its ability to prevent excess inventory or stockouts.

How Perpetual Inventory Management Systems Work

Perpetual inventory management systems work by continuously tracking inventory levels in real time. Each time a product is received or sold, the system updates the inventory levels automatically.

This type of system uses barcode scanners or other automated methods to keep track of inventory movement, which provides a more accurate and timely picture of stock levels. The key benefit of perpetual inventory is that it allows businesses to monitor inventory levels on a daily basis, providing a real-time view of inventory movement.

This helps businesses to make more informed decisions about purchasing, inventory optimization, and demand forecasting. However, perpetual inventory systems require a larger investment upfront, as they rely on advanced technology and software.

How Periodic Inventory Management Systems Work

Periodic inventory management systems work by taking physical inventory counts periodically, usually at the end of an accounting period. This system relies on manual processes to count and track inventory movement, which can be time-consuming and prone to errors.

The benefit of periodic inventory is that it requires less upfront investment, making it a more affordable option for smaller businesses. However, the system only provides a snapshot of inventory levels at a specific point in time, which can lead to inaccuracies and stockouts if not managed carefully.

Moreover, this system is not ideal for businesses with complex supply chains or those that require real-time inventory tracking.

What are the Key Features of Perpetual Inventory Control Systems?

Perpetual inventory control systems are designed to provide real-time inventory tracking and are ideal for businesses with a high volume of sales and inventory movement. These systems can help businesses keep track of inventory levels on a daily basis and make informed purchasing decisions based on demand forecasting and ABC analysis.

Some of the key features of perpetual inventory control systems include:

  • Real-time inventory tracking - Perpetual inventory control systems use technology such as barcode scanners and mobile devices to track inventory movement in real-time.
  • Automatic updates - Inventory levels are automatically updated in the system after each transaction, which helps prevent stockouts and excess inventory.
  • Demand forecasting - Perpetual inventory control systems use historical sales data and other factors to forecast demand and help businesses make informed purchasing decisions.
  • ABC analysis - These systems can also help businesses analyze inventory based on the Pareto principle, which states that 80% of sales come from 20% of products. This can help businesses focus on their most profitable products.
  • Cloud-based solutions - Many perpetual inventory control systems are cloud-based, which means they can be accessed from anywhere with an internet connection and are easy to scale as a business grows.

Overall, perpetual inventory control systems provide businesses with an accurate and up-to-date picture of their inventory levels, which can help them optimize their inventory management and improve their bottom line.

Benefits of Real-Time Inventory Tracking

Real-time inventory tracking has become an essential tool for businesses looking to stay competitive in today's fast-paced market.

The ability to track inventory levels in real time provides a range of benefits, including:

  • Improved Accuracy: Real-time inventory tracking reduces errors that can occur with manual inventory management methods. This accuracy translates into better customer service, as it ensures that the inventory is always up-to-date.
  • Better Decision Making: Real-time inventory tracking provides business owners with accurate and current information about their inventory levels. This information enables them to make better purchasing decisions, manage their inventory more efficiently, and identify areas where they can optimize their inventory management.
  • Increased Efficiency: Real-time inventory tracking eliminates the need for manual inventory counts, which can be time-consuming and prone to errors. This increased efficiency enables businesses to reduce labor costs and operate more efficiently.
  • Improved Customer Satisfaction: Real-time inventory tracking ensures that businesses can always meet customer demand, which increases customer satisfaction and loyalty.

Real-time inventory tracking is a valuable tool that provides businesses with accurate, current information about their inventory levels. This information can be used to make better purchasing decisions, increase efficiency, and improve customer satisfaction.

Learn More About the Different Types of Inventory Management Systems with Distribution Systems International

Looking to learn more about the different types of inventory management systems? Look no further than Distribution Systems International! Our team of experts can help you choose the right inventory management system for your business needs, whether you're a small business owner or a large corporation.

With years of experience in the industry, we have the knowledge and expertise to guide you through the process of selecting and implementing an inventory management system that will help you optimize your inventory levels, reduce costs, and improve overall efficiency.

We'll help you evaluate your options and find the system that's right for your business, whether you're looking for a cloud-based solution or a more traditional inventory control system. Trust us to help you take your inventory management to the next level and streamline your business operations.To schedule a consultation with one of our inventory management specialists and discuss perpetual and periodic inventory, contact us at 800-393-6090 at Distribution Systems International today!

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