In the world of inventory record keeping and accounting, there are two methods you need to be aware of – periodic inventory and perpetual inventory.

If you employ the periodic inventory method, you rely on annual physical inventory counts, often performed near the end of your financial year.  

In contrast, the perpetual inventory method, also known as cyclical inventory, is continuous. On a regular basis, a specific section of your inventory is reconciled. This allows you to validate your inventory records on an on-going basis. 

Periodic inventories allow you to start each period with verified inventory numbers, but because the activity only takes place once a year, it can also be difficult to recognize patterns and trends, that could help you reduce loss. Annual inventories are also time consuming, and can be disruptive to other areas of your business if you conduct them in-house.

Conducting inventories requires a specific set of skills. When you choose to complete an entire inventory at year end, which could include 100’s or even 1000’s of SKUs, you often require extra manpower.

But where does this manpower come from?

You could move staff from profit generating tasks to count your inventory, but you would be impacting productivity, schedules, client facing tasks, or delay other work that needs doing.

You could get your Parts Department to work after hours, but that will mean overtime costs, and some employees might find that disruptive, and impact morale. Depending on your business size, the volume of work may be such that handling it off-hours is just not doable, in a reasonable time frame with Parts Department staff.

Or, you could maintain your day to day operations and borrow staff from other areas. The problem is, these employees aren’t always qualified to do inventory. While it seems straightforward, they probably don’t know where all of the product is stored, how to properly read packaging, or a myriad of other parts/inventory specific knowledge.

Ultimately, any of these options will increase the risk of error and potentially affect the accuracy of your auto parts inventory. For periodic inventories, the best solution is often to outsource the work to an experienced inventory service. You get the benefit of fully trained professional help, that can work quickly and accurately, and minimize distractions to your daily work.

Perpetual inventory will provide you with ongoing insight into your parts inventory allowing you to identify problem areas and improve efficiencies. Cycle counts also have a positive effect on ordering and obsolescence, allowing you to identify parts that are not moving in a timely manner or others that you can’t keep on-hand in the right volume.

In addition, conducting perpetual inventories reduces overtime costs and disruptions to operations, as the actual inventory count is completed during work hours. and you are not having to devote days at a time to the counting process at year-end.

Cycle counting can be assigned to your automotive parts employees on a routine basis, especially to focus on high-valued parts, special order parts, or parts that seem to be prone to inventory mistakes. Qualified external help can also be brought in conduct perpetual inventory activities according to your schedule and needs. The benefit of having an external partner come in, is that you get a professional expert resource, that can reliably perform the service consistently throughout the year.

You also have the option to combine these two methods. To do so, we recommend focusing your cycle counts on targeted parts as part of your optimization activities, and conduct an annual inventory to cover the remainder.

If you have any questions about inventory methods or would like quote, contact us today!