Computerized Replenishment System

A Computerized Inventory Control System is the integration of sub-functions involved in the management of inventory into a single cohesive system. It is software installed on the computer systems that enables a firm to keep a check on the inventory levels by performing the automatic counting of inventories, recording withdrawals and revising the stock balance.

A computerized inventory system enables a company to monitor inventory levels in real time throughout the day. Also known as inventory management software, businesses can stay updated with inventory orders, counts and sales. A computerized inventory system can help you avoid costly mistakes, know what is and isn’t moving, get your whole team on the same page, and help you keep track of inventory from anywhere.

It is very difficult for any firm to maintain a large stock of inventories, and therefore, many firms have adopted the JIT system in terms of Minimum and Maximum limit for the stock. There is an inbuilt system for placing orders in computer systems that automatically generates a PO to the supplier when the minimum level of the stock or the reorder point is reached.

The benefits of a computerized inventory control system can be derived, when the business integrates its inventory control system with the other systems such as accounting and sales, that helps in better control of inventory levels.

In practice, when the inventory level reaches to its minimum point, the system automatically generates a purchase order, which is sent to the supplier electronically. Also, the other copy of the PO is sent to the accounting department. Once the material is received from the supplier, an inventory gets updated on the system and at the same time, the notification is sent to the accounting department, which is used against the supplier’s Invoice and the PO copy.

Thus, a computerized inventory control system has made a life of both the manufacturer and the big retailer easy, who can manage their inventories electronically without wasting much time on the manual tracking system. Also, all the documents, such as purchase order, Invoice, account statement gets automatically generated with a use of computerized inventory control system.

But however, too much reliance on the technology may be problematic in the situations of power failure and lost internet connectivity, as it may bring a system to a standstill. Also, the accuracy of inventory items inserted in the system depends on the data entry made by the person. Thus, a proper entry should be made to obtain the correct inventory levels.

Advantage

Automated Reordering and In-Stock Information

Computerized inventory informs employees and customers within seconds whether an item is in stock. Because the inventory is synced with sales, there is a running tally of what is in stock and what isn’t. This helps flag reordering needs and provides better service to customers. As inventory drops below a specific threshold, new orders are placed with vendors and tracked to let customers know when the new products will arrive.

Integration With Accounting

Many of the computerized inventory platforms integrate with accounting software to track cash flow. This makes the process of transferring inventory costs and assets between programs seamless and reduces the need for additional bookkeeping costs. Financial statements are more easily generated with shared data between inventory and bookkeeping.

Forecasting and Planning

Inventory management software does more than track where inventory is located and when to reorder it. A data collection system is used to create needed forecasting and strategic planning reports. Business owners review trends regarding which products do well in certain months or during specific cyclical seasons. Business owners use this data to plan for growth and order inventory intelligently to best utilize cash flow resources.

Disadvantage:

System Crash

One of the biggest problems with any computerized system is the potential for a system crash. A corrupt hard drive, power outages and other technical issues can result in the loss of needed data. At the least, businesses are interrupted when they are unable to access data they need. Business owners should back up data regularly to protect against data loss.

Malicious Hacks

Hackers look for any way to get company or consumer information. An inventory system connected to point-of-sale devices and accounting is a valuable resource to hack into in search of potential financial information or personal details of owners, vendors or clients. Updating firewalls and anti-virus software can mitigate this potential issue.

Reduced Physical Audits

When everything is automated, it is easy to forego time-consuming physical inventory audits. They may no longer seem necessary when the computers are doing their work. However, it is important to continue to do regular audits to identify loss such as spoilage or breakage. Audits also help business owners identify potential internal theft and manipulation of the computerized inventory system.