A good inventory tracking system accomplishes four things: 1) it shows what merchandise is in stock, 2) it shows which items are on order, 3) it notifies the retailer when ordered merchandise is scheduled to arrive, and 4) it tells what merchandise has been sold. This information is used to plan future purchases, to determine what is selling and when it is selling, and it helps determine what items need to be reordered or discontinued.
The effectiveness of a pen and paper system depends on many things. These items include how much inventory the company carries, the variety of items, the frequency of ordering, and the number of new or one-time-only purchases. If the company carries a large inventory, has a large variety of items in stock, or re-orders frequently then a computerized system would be easier to use and maintain.
PEN AND PAPER SYSTEMS
There are three main pen and paper systems for tracking inventory: Manual Tag System, Dollar-Control System, and Unit-Control System. The manual tag system involves a tag that is attached to every piece of merchandise. At the point of purchase the tag is removed and later cross-checked against the physical inventory. This system is updated every day and is used to track how many items have been sold and what portion of the inventory remains. This information is charted on a handwritten graph. Down the side lists the item, and across the top runs the date of purchase. The number of items sold is entered where the item and date intersect, and subtotaled according to date and to item. Finally the total amount is calculated to determine the number of items that are sold during a sales period.
The Dollar-control system is used to determine the cost and gross profit margin on an individual inventory item. In this system the cash register receipt is used for cross checking information with the physical inventory. The receipt lists the product, quantity sold, and sales price. This information is cross-checked against the delivery receipt, and the sales price and quantity are compared to cost.
The Unit-control system also compares sales receipts to physical inventory. Inventory is monitored by a physical count of items in stock. Another way is to use a bin ticket. Bin tickets list stock number, item description, maximum and minimum quantities that are stocked, selling price, and any other pertinent information. As items are sold the bin ticket is marked and then compared to a complimentary card in the office. This card contains information on the stock number, selling price, cost, number of items that are contained in a case, supplier and alternative supplier of the item, order dates, and delivery schedules. The retailer will do a physical check of the inventory periodically to update and track the amount of inventory left in the bins and determine what needs to be reordered and what the profit margin is.
COMPUTERIZED INVENTORY TRACKING SYSTEMS
With the price of computerized inventory tracking systems going down it is now more affordable to buy and utilize these types of inventory control systems. They provide greater accuracy and more flexibility in the types of information and reports that can be generated by the program, than can be obtained with a manual inventory system. The main computerized inventory tracking system is known as Point of Sale, often abbreviated as POS. POS systems update inventory counts at the “point of sale” and because of this instant update, retailers have a better idea of what needs to be reordered, what items are moving, and what items are stale.
The POS system can be integrated with other add-on products like credit card scanners, bar code scanners, receipt printers, and can also be integrated into the main accounting software. This helps to keep all financial records up to date and available for analysis by management, sales department, and accounting department. The benefits to this type of system are obvious. First it is easier to maintain and utilize than a manual system. Entry of sales information is often as simple as scanning in the bar coded merchandise when it is delivered, and scanning the item at the check out counter when it is sold. This scanned information updates inventory records and also records cost and sale price. Profits are automatically calculated and made available for instant analysis. Pricing can be updated automatically from the main computer. The updated price is automatically applied to all of the selected items in stock. Product information can be updated simply by changing the data in the computer. Tracking sales is much simpler because all the calculations are done by the computer and can be printed out in a number of financial reports. Even the financial reports can be customized to show profit by day or by item. Keeping an exact count on what items have been entered into the inventory, and which items have been sold also enhances security. This up-to-date count will let the retailer know if merchandise is being stolen. Taxes on items can also be set up to portray a variety of tax rates.
CONCLUSION
To determine which system is best for your business examine the quantity and frequencies in your inventory tracking system. If you maintain a small inventory with few items then a manual system may work fine. However if you have a medium to large inventory with more than one item in stock a computerized system may be more effective in tracking you inventory and maintaining your records.
