Periodic Inventory Systems

Question: Given the availability of sophisticated computers, do any companies still use periodic inventory

systems? With bar coding and the advanced state of technology, is periodic inventory simply an antiquated system

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that is no longer found in actual practice?

Answer: Obviously, in this computer age, perpetual inventory systems have come to dominate because they

provide valuable information to company officials. However, some types of businesses will simply never change

from the simplicity of a periodic system.

A beauty salon or barber shop, for example, where services are rendered but a small amount of inventory is kept

on hand for occasional sales, would certainly not need to absorb the cost of a perpetual system. Visual inspection

can alert the employees as to the quantity of inventory on hand.

Restaurants, sandwich shops, ice cream stores, and the like might well choose to use a periodic system because

purchasing usually takes place at the establishment where quantities are easy to observe and manage. The

information provided by a perpetual system does not necessarily provide additional benefit.

“Dollar stores,” which have become particularly prevalent in recent years, sell large quantities of low-priced

merchandise. Goods tend to be added to a store’s inventory as they become available rather than based on any

type of managed inventory strategy. Again, officials must decide whether keeping up with the inventory on hand

will impact their decision making. If not, the cost of a perpetual system is unnecessary.