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August 31, 2021

The Use of A Perpetual Inventory System for eCommerce Business

An eCommerce business cannot thrive without an inventory management tool or software. The inventory management tool intends to help you out with stock keeping and order management aspects. You need accurate numbers to ensure that your order and inventory management is running and processing effectively. 

You do need an extensive inventory to store the demanding products that are being ordered daily. But, you should not possess a list so comprehensive that you are forced to overpay for the storage availability when it is not in use. Hence, at this time, you need to consider changing the inventory system embedded within your eCommerce business. A perpetual inventory system is an ideal pick for your eCommerce business. 

In this article, you will get a clear insight into how a perpetual inventory system can be used by eCommerce businesses to change and adapt to the modern way of inventory management. 

Overview of Perpetual Inventory System for eCommerce Businesses

These types of inventory systems are better known as POS Terminals. They are integrated types of software that promote inventory management for perpetually updating the inventory of products. Under this method, you can expect extreme accuracy, as all of the information about the products in-stock will be thorough & accurate. The sole reason for this efficacy with this inventory system is the recording of order details in real-time. 

The best part of a perpetual inventory system is integrating with all of the online and offline sales channels to track inventory aspects. It will eradicate all of the possibilities of human error or delays, as the data can also be updated onto the account books, in real-time, without fail. In short, the perpetual inventory system for eCommerce business owners acts as a management tool that records inventory stockouts and order requests. 

It is a completely automated process of inventory management that will record the changes within the stocks right when the transactions are made. For instance, if the final product of a category is in the inventory, and an order request is processed for the same, then the perpetual inventory system will immediately put up the tag of ‘Out of Stock’ over the order and raise a request to suppliers or management authorities for more stocks! 

Perpetual Inventory System Working Process

Suppose you own an eCommerce business with a traditional inventory management system and wish to upgrade to a perpetual inventory system. In that case, you need to emphasize your knowledge of how this system works. The working steps for the same are as follows:

Step 1: POS System Updates Upon Business Transactions

Right from the moment when a consumer places an order request, the perpetual inventory management system, embedded within POS, updates the debit information immediately upon the sales channels. The data is instantly added or recorded onto the inventory details. The use of Radio Frequency Identification or Barcode scanning potential makes this process even faster and easier. 

Step 2: Automatic Updates for the Cost of Goods Sold (COGS) Section

There is a tab that says COGS (Cost of Goods Sold). When an order is received or sold over the eCommerce store, the COGS section gets updated and recalculated. It will help the business or inventory management team analyze the accounts and tally the products sold and returned in a single interface. 

Step 3: Re-Order Points are Adjusted Frequently 

A reorder point is defined as a predefined point that indicates the inventory managers to bring in more stocks for the particular products or goods. The perpetual inventory management system uses the existing and old data to automatically update the reorder points for all of the products, based upon category-wise selection. It is automated to decide, based upon the increase or decrease in sales rate for a particular product or a complete category. In this way, the inventory will never run out of stock for demanding products. 

Step 4: Automated Generation of Purchase Orders

The SKUs specified for all of the products are mentioned with their reorder points automated by the perpetual inventory management system. This inventory management system also generates the purchase orders automatically when the SKU of any product is close to its reorder point. 

Step 5: Tracks the Inventory Updates

Inventory updates refer to the receiving of new products to add to the stock. When the suppliers process the purchase order and send it to inventory, the WMS (Warehouse Management Software) is used by the employees at the hub to scan such products. Hence, this will then feed the stock information onto the dashboard of your inventory management tool. And, these products are then made available over the site, app, and other sales channels for orders. 


This entire process is a cycle that continues to offer seamless inventory management potential to eCommerce business owners. Therefore, you need to understand this system entirely before you can go ahead and utilize it!

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