6 Main Disadvantages of Perpetual Inventory Systems

Online software systems that help us in business are well and good. They ensure streamlining many essential aspects of the company, from accounts, management, marketing, and inventory controls, among many others. Employing inventory systems of any type is imperative, especially in an organization that would handle physical items of various kinds in their business module.

The absence of any type of inventory control in business would lead to utter chaos in the receiving, stocking, and sales of the items, which are an integral part of the company. Hence, you need to track every aspect so that no item that comes in or goes out without going through the proper records.

Previously the items were tracked by periodic inventory control but after the introduction of computers in 1970, it changes the software things. The introduction of perpetual inventory systems was with some issues and flaws.

The disadvantages of perpetual inventory systems came to the fore though there were equally or more advantages by employing such systems. Some of them are listed below, but that does not mean that the disadvantages of perpetual inventory systems would outweigh the benefits. There are more of the latter rather than of the former hence employing it would be more advantageous.

The disadvantages of perpetual inventory systems are listed below.

Disadvantages of Perpetual Inventory Systems –

#1. Loss of items

Using the perpetual inventory systems ensure fast and easy record keeping of various items in stock in any organization. The issue, with such a system being in place, is when you lose an item for any reason or another. Unless checking it physically, you can detect the anomaly.

In the periodic inventory system, there was physical inventory conduct to match the physical stock with the stocks in the books, which was imperative. But in the perpetual inventory system, do not require unless done proactively, which is when any loss would be detected. You can consider this as significant disadvantages of perpetual inventory systems.

#2. Breakages

The same goes for breakages as well, if they do not adjust immediately into the system. If any item breaks and is un-saleable or useable, then it should be discarded, and the records corrected accordingly. If any item is broken and discreetly discard and not adjusted into the system, it would remain so, unless you check it physically. This is a major disadvantage in perpetual inventory systems.

#3. Theft

If we fail to detect or arrest the theft at the point of exit of such items from the warehouse or stores, it will remain unaccounted for. That would also come into the management’s domain only when physically checked. Large companies implement strict procedures to prevent theft and use many types of controls at the physical exit points. This is also a significant disadvantage in perpetual inventory systems.

#4. Scanning errors

Every item within a perpetual inventory control system would need to have a “barcode” or a tag to ensure it could be scanned. If an error occurs in the scanning system either when the item comes in or goes out, the perpetual inventory system would not be able to detect it. This is another disadvantage of perpetual inventory systems.

#5. Improper inventory tracking

There should be a very streamline and effective back up to the perpetual inventory system. If such a system is not implemented, detecting and improper inventory tracking would not be proactively detected. This is another major issue and disadvantages of perpetual inventory systems.

#6. Hacking

Another major disadvantage of perpetual inventory systems because any software that you would implement would use the internet. We know that even the top American security systems the criminals have a breach. There is no limit to unscrupulous individuals if they try their hand to hack and infiltrate. Being online, your vulnerability increases that would not happen if you stick to the old system of monitoring stocks in “stock cards.”

Conclusion:

While there are advantages in every system, there would be disadvantages too. Abstaining from using the online systems is not the problem. Today we can implement adequate controls to arrest the situation, but we know that the “world is not perfect.”  

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