Inventory Systems Paper Essay Example

typically a quarterly or monthly accounting period, inventory is physically counted to determine the ending amount. The cost of each item is then calculated and subtracted from the combined purchases and beginning inventory to determine cost of goods sold (Business Dictionary, 2010).

The periodic inventory system maintains the value of the inventory at the beginning of the period without updating it for purchases, using an account called purchases at the end of the period. The Just-In-Time (JIT) inventory system, which aims to reduce ordering and inventory holding costs, is effective for companies that lose money by holding products in their inventory for a long time and can lower ordering costs to increase profits. The Advanced Tracking System (ATS) offers several advantages for inventory management.

The advantages of this system are numerous. Firstly, it helps to enhance operations and productivity. Secondly, all inventories are monitored and updated in real-time. Thirdly, it saves money by keeping track of damages and updates of new and old goods. Fourthly, it has very few errors. Fifthly, it is flexible and can be used by both small and large companies. Finally, it assists the finance office in tracking anything related to finances such as non-inventory items such as time and money paid to employees (H.K., 2009). Despite its advantages, like any inventory system, there are some disadvantages to consider.

According to White (2010), there are some drawbacks to using an ATS, including hefty start-up costs and ongoing maintenance expenses, the time-consuming process of manually inputting information depending on the type of system used, the need for extra time and effort to train due to the system's complexity, and the potential for decreased productivity

if there is a stock overage. In comparison, a perpetual inventory system offers advantages over a periodic inventory system by keeping constant, detailed, and precise records of each purchase or return (Meehan, 2010), which helps ensure accurate stocking levels and a lower risk of running out of any particular item.

As a result, implementing this system may enhance customer contentment as opposed to the periodic inventory system which does not distinguish between sold goods and those that are stolen, lost, or damaged. Essentially, this approach only monitors the starting and ending inventory, making it challenging to detect instances of shoplifting or employee dishonesty.

The cost of technology required to maintain a perpetual inventory system is a major drawback, as theft, damaged products, and bar code errors can impede inventory replenishment and lead to product over- or understatement (Meehan, 2010). Additionally, fewer employees are necessary to maintain a perpetual system compared to a periodic one, as the technology replaces manual workforce. An example of this is Dell computers, which showcased Just-In-Time inventory system as a means of improving their overall performance and cost reduction.

According to Atkinson (2005), it is financially advantageous to supply customers with products as they are ordered in order to prevent rapid loss of value while sitting in inventory. Every computer that remains in the Dell warehouse for seven days loses one percent of its value. Additionally, Beard and Butler (2000) note that companies implementing JIT may face challenges such as uncooperative suppliers, distance between suppliers and manufacturers, and overworked employees. Other obstacles to JIT implementation include unwillingness by management due to initial costs, difficulties arranging frequent small batch deliveries for remote factories, and manufacturing

processes that are not compatible with JIT, such as those in which a component needs to be cured or dried between processes.