What is Perpetual inventory in the warehouse
Perpetual inventory enables a better overview of stock levels, delivery without delays, high customer satisfaction, minimisation of shortages and optimised logistics.
What is Perpetual inventory?
Perpetual inventory in warehousing describes an inventory procedure in which stocks are not only recorded once a year on a specific date, but are documented continuously and in real time. This allows companies to keep track of their stock levels at all times and identify bottlenecks or shortages at an early stage. Perpetual inventory is considered a modern, digital procedure and is an integral part of efficient inventory management, especially in warehouse logistics, production and retail.
Difference between periodic inventory and perpetual inventory
In traditional inventory counting, the entire stock is recorded in full at a specified point in time, often at the end of the year. This means high personnel costs, possible operational disruptions and only a selective overview of stock.
Perpetual inventory, on the other hand, runs continuously and in parallel with day-to-day business. Inventory changes such as goods receipts, stock transfers or deliveries are recorded directly in the warehouse management system (WMS). This gives companies an up-to-date overview of their inventory at all times. This difference between periodic inventory and perpetual inventory leads to greater flexibility, lower costs and higher accuracy.
Definition: Real-time inventory / real-time-based inventory
Real-time inventory – also known as real-time-based inventory – uses digital technologies such as barcode scanning, RFID or pick-by-light systems to record stock levels without delay. Every movement of goods is documented immediately in the system. This allows companies to check at any time which items are available in the warehouse, in what quantities and at which locations..
Real-time inventory management is therefore not only a further development of continuous inventory management, but also a decisive step towards the digital transformation of warehouse logistics. It enables precise planning, faster order picking and greater transparency throughout the entire supply chain.
What are the advantages of perpetual inventory in warehousing?
Perpetual inventory offers companies numerous advantages. Not only does it ensure a continuously up-to-date overview of stock levels, it also reduces errors, saves costs and increases customer satisfaction. The combination of digital inventory management, automated data collection and smart storage strategies makes inventory management in the warehouse more efficient and transparent..
Overview and transparency of holdings
With permanent inventory management in the warehouse, companies can keep track of their goods at all times. Instead of conducting an inventory check just once a year, real-time inventory management provides continuous information on storage locations, quantities and goods movements. This transparency enables precise planning of replenishment, storage space management and order picking..
Minimisation of shortages and delivery delays
A key advantage of perpetual inventory is that it prevents shortages. Since all goods movements are recorded directly in the warehouse management system (WMS), discrepancies can be quickly identified and rectified. Companies benefit from greater delivery reliability, fewer bottlenecks and fewer delays in order processing.
Higher customer satisfaction and repeat orders
When stock levels are accurately recorded at all times, orders can be processed on time and in full. This increases customer satisfaction and encourages repeat orders, as customers can rely on reliable delivery. Continuous inventory therefore contributes directly to a positive customer experience.
Cost savings through optimised logistics and storage strategies
Perpetual inventory not only provides accurate stock figures, but also forms the basis for optimising logistics and warehousing strategies. Continuous analysis of goods movements reveals patterns that companies can incorporate directly into their inventory and warehouse planning.
- ABC analysis and classification of items
Permanent inventory allows fast-moving items (A items), medium-moving items (B items) and slow-moving items (C items) to be reliably identified. Items that are in high demand are placed closer to the picking zones, while goods that are rarely needed are placed further away. This significantly reduces picking distances and process times. - FIFO and LIFO strategies in the warehouse
Real-time inventory data from the inventory facilitates the implementation of first-in-first-out (FIFO) strategies, which are particularly important for perishable goods or components with a limited shelf life. Last-in-first-out (LIFO) methods can also be used in a targeted manner if this is advantageous for the process. - Route optimisation and storage location strategies
Permanent inventory takes enable storage locations to be adjusted dynamically. This means that items that are frequently ordered together can be stored next to each other (chaotic warehousing with a system). This not only reduces search times, but also lowers the energy consumption of conveyor technology or industrial trucks. - Replenishment and procurement strategies
Transparent data allows replenishment quantities to be calculated more accurately. This reduces both overstocking and shortages and ensures an optimal flow of goods along the entire supply chain.
How does perpetual inventory work?
Permanent inventory management in the warehouse is based on digital processes that enable ongoing stock-taking in real time. At the heart of this is a warehouse management system (WMS) that automatically records and processes all goods movements. The system is supplemented by modern identification and picking technologies such as barcode scanning, QR codes, RFID, pick-by-light and pick-by-voice..
Use of warehouse management systems (WMS)
The warehouse management system forms the basis of continuous inventory management. Every movement of goods – from goods receipt to stock transfer to goods issue – is recorded in the WMS.
- It documents the storage location, quantity and status of items in real time.
- Discrepancies between target and actual stock levels are immediately visible.
- Integration with ERP systems (e.g. SAP, Microsoft Dynamics) allows stock levels to be linked to ordering and production processes.
This means that perpetual inventory is not carried out as an additional work step, but as an ongoing process in day-to-day business.
Data capture via barcode, QR code and RFID
Accurate data entry is crucial to ensure that stocks are transferred correctly to the WMS:
- Barcode & QR code: Proven and cost-effective methods for identifying items. Each scan immediately updates the inventory.
- RFID technology: Enables bulk recording of many items simultaneously and even without visual contact. Particularly useful for quick goods receipt checks and tracking high-value goods..
The combination of these technologies ensures high data quality and reduces incorrect entries or manual input errors.
Integration of pick-by-light, pick-by-voice and paperless picking
Another component of perpetual inventory is paperless picking::
- Pick-by-light: Light indicators at the storage locations show employees which items to pick. Each picking process is automatically recorded in the WMS.
- Pick-by-Voice: Pickers receive instructions via a voice system and confirm the removal via voice commands. Errors are minimised as their hands remain free.
- Paperless systems: Paper lists are no longer necessary; all processes are digital, which drastically reduces inventory costs..
These procedures ensure that stocks are updated in real time and that continuous inventory management is fully automated.t.
FAQ on perpetual inventory
Frequently asked questions about perpetual inventory
What is the difference between permanent and continuous inventory?
The terms are often used synonymously. Both describe a process in which stocks are recorded continuously throughout the year. In contrast to periodic inventory, stocktaking is not carried out once a year, but continuously in real time via a warehouse management system (WMS)..
For which companies is perpetual inventory worthwhile?
Perpetual inventory is particularly worthwhile for companies with high goods turnover, many product variants or complex warehouse structures – e.g. in e-commerce, retail, manufacturing or the automotive industry. It makes sense when accurate inventory overview and rapid replenishment planning are crucial.
How does perpetual inventory reduce shortages?
Since every movement of goods is recorded directly in the warehouse management system, discrepancies between target and actual stock levels can be identified immediately. This significantly reduces the risk of shortages, incorrect bookings or delivery delays. In addition, RFID, barcode scanning and pick-by systems prevent incorrect withdrawals.
What are the costs associated with RFID and when is it worth using?
The introduction of RFID technology is more expensive than barcode or QR code systems, as transponders and readers incur additional costs. Its use is particularly worthwhile for high-value products, in the automotive industry or wherever rapid bulk recording and complete traceability are required.
Is perpetual inventory legally permissible?
Yes, a permanent inventory is legally permissible in the UAE and wider GCC, provided that companies maintain proper books of accounts and accurate inventory records in line with Commercial Companies Law and Commercial Transactions Law. The key requirement is that all stock movements — inbound, outbound, transfers, and returns — are continuously recorded in a warehouse management system (WMS) or ERP, with records stored for the legally required retention period (minimum five years in the UAE and up to ten years in KSA). To remain compliant, the system must be audit-proof, allowing external auditors, tax authorities such as the FTA, or free zone regulators like JAFZA and ADGM to verify balances at any point. Companies must also be able to reconcile electronic records with physical stock through cycle counts or random checks, ensuring that the inventory is always plausible and transparent. By meeting these requirements, businesses can legally implement permanent inventory practices, gaining efficiency and reducing the need for time-consuming full stock-takes while maintaining compliance with local regulations.