Continuous inventory is a systematic documentation process that adjusts inventory details as items are removed, ensuring necessary goods are always on hand and prompting reorders. It is common in manufacturing facilities and includes periodic reconciliation processes to ensure stability. The approach makes it easy to reschedule important parts and supplies.
Sometimes called perpetual inventory, continuous inventory is a means of maintaining a systematic documentation process that is always in line with the physical inventory on hand. As items are removed from the stock or supply area for use or consumption, the continuous inventory details are adjusted to note the reduction in physical inventory. Many companies use this method to ensure that necessary goods are always on hand and as a reminder to reorder certain important products when necessary.
Maintaining an ongoing inventory is common in manufacturing facilities where there is a constant need to replace worn parts in production machines. Generally, a supply area is established somewhere on the production site and a supply manager is charged with overseeing physical and accounting inventory situations. Often, people who need to obtain parts or other supplies as part of maintenance and repair operations approach the manager with a written request for what is needed. The manager enters the physical inventory storage area, retrieves the item or items, and hands them over to the requesting party. At this juncture, the supply manager can use the written product request to deduct items from the ledger inventory, bringing the physical and written inventory back into synchrony.
In many manufacturing situations, there are periodic reconciliation processes that double-check book inventory against physical inventory. For example, a company may require that there be a manual count of all assets in physical inventory at least twice per calendar year. Hand count results are compared with the book inventory and adjustments made as necessary. This process acts as a secondary check and balance system to ensure the stability of an ongoing inventory.
One of the key benefits of the continuous inventory approach is that it makes it easy to reschedule important parts and supplies once the inventory level reaches a designated low point. By posting recent disbursements to book inventory, the supply manager will watch when the number of units in physical inventory drops below a certain point and initiate the process of executing an order for additional units. This process helps ensure that there are always enough parts and supplies available to keep production machinery running smoothly.
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