CRM ARTICLE

Periodic Inventory and CRM: Enhancing Efficiency Together

SmallBizCRM Staff – July 17th, 2024

What Is a Periodic Inventory System?

A periodic inventory system is an inventory management method where updates to inventory levels occur at set intervals, such as weekly, monthly, or quarterly. This system contrasts with the perpetual inventory system, which continuously tracks inventory changes in real-time. In a periodic inventory system, businesses rely on physical counts of stock conducted at these regular intervals to determine inventory levels and calculate the cost of goods sold (COGS).

The periodic inventory method is often preferred by smaller businesses or those with less complex inventory needs because it is simpler and more cost-effective. It eliminates the need for sophisticated software or technology to constantly monitor inventory, which can be a significant financial investment for small businesses. Instead, businesses using this system manually count their stock and update their records accordingly.

While this approach can save money and reduce the need for complex technology, it does have its drawbacks. Because inventory is only updated periodically, there can be discrepancies between actual stock levels and recorded amounts between counts. This can lead to challenges in inventory management, such as stockouts or overstock situations. Additionally, the periodic system may require more effort and time during the physical count periods, especially if inventory levels are high.

Despite these challenges, the periodic inventory system remains a viable option for businesses seeking a straightforward and economical method of managing their inventory. It balances the need for inventory accuracy with cost savings, making it a practical choice for many smaller operations.

When Is a Periodic Inventory System Used?

1. Small Businesses: Small retailers or businesses with a limited product range often find the periodic inventory system sufficient due to its simplicity and lower cost.
2. Seasonal Businesses: Companies with significant seasonal fluctuations may prefer periodic counts to align with their busy and off-peak periods.
3. Manual Record-Keeping: Businesses that do not have the resources for sophisticated inventory management software often resort to periodic systems as they rely on manual counts and record-keeping.
4. Less Frequent Inventory Movement: Industries where inventory turnover is slow or predictable may not need continuous tracking and can manage with periodic updates.

Can CRM Be of Any Benefit in This Process?

Absolutely! A Customer Relationship Management (CRM) system can complement a periodic inventory system in several ways:

1. Sales Data Integration: CRM systems provide detailed sales data that can help predict inventory needs and schedule appropriate times for physical counts, optimizing the periodic inventory process.
2. Customer Insights: Understanding customer purchasing patterns through CRM analytics allows businesses to forecast demand more accurately, reducing the risk of stockouts or overstocking.
3. Improved Communication: CRM systems facilitate better communication across different departments, ensuring that sales, marketing, and inventory management are aligned.
4. Supplier Management: CRM tools can manage supplier relationships and track order histories, aiding in the efficient planning of inventory replenishment cycles.