Why Perpetual Inventory Is The Only Viable Solution for Modern Ecommerce Businesses

Are outdated inventory systems costing your ecommerce business? In today’s fast-paced market, real-time tracking is not just an advantage, it’s a necessity. 

Inventory management methods have come a long way over the centuries. 

• 20,000 years ago, you’d keep track of your items by leaving tally marks on cave walls, or cutting hash marks into portable sticks. 

• In the Neolithic period in Mesopotamia circa 7500 BCE, you’d use small clay tokens to keep track of your agricultural goods, animals and plants. 

• By the early 1900s, mechanical punch cards were in use. As computers hit the scene in the 1950s, the early electronic inventory management systems were born. 

It wasn’t until the 1970s, however, that a major shift began. Prior to this time, keeping track of your stock levels in real time was still impossible and businesses relied on manual counts and periodic updates. 

The breakthrough? 

Perpetual inventory systems, made possible by barcoding and RFID technology, allowed businesses to track inventory instantly and accurately. What was once a futuristic concept is now a fundamental part of modern ecommerce. 

But here’s the reality: Despite the advancements in technology, some businesses still cling to outdated inventory management methods, such as periodic inventory. For very small businesses, this may be acceptable. But for high-volume ecommerce operations? Relying on period inventory systems is no longer an option. It’s inefficient, prone to errors and ultimately unsustainable. 

In this post, we’ll explore why perpetual inventory systems are no longer a luxury but a necessity for ecommerce sellers. Let’s dive into why these systems are crucial for modern businesses and how they’ll help you stay competitive and efficient.

What is Perpetual Inventory and How Does It Work?

Perpetual inventory is a method of continuously tracking inventory levels in real time. 

This means every time there’s a transaction, whether it’s a sale, a return or a restock, the system updates stock levels immediately. No more waiting for scheduled counts or relying on manual entries. 

The process is automated, accurate and provides a real-time view of inventory. It does take some time to get set up with a perpetual inventory management system (see “How Do I Get Started With Inventory Management?”) but this time is a highly valuable investment that will pay dividends as you grow your business. 

Operating your business without a perpetual inventory system is like watching a football game where the scores are only updated at halftime and at the end of the game. Which team is winning? How many goals has the other team scored so far? No one knows. 

Scoreboards update in real time for a reason - and your inventory system should do the same. 

Why Perpetual Inventory Is Essential for Ecommerce

In your modern ecommerce business, sales can happen at any moment day or night. Stock levels can change by the minute and without real-time tracking, your business risks running out of stock on popular items, missing out on sales or overstocking items that tie up valuable capital. 

A traditional periodic inventory system is simply too slow and prone to errors to handle the fast-paced nature of today’s ecommerce marketplace. In a highly competitive environment, these types of errors can make or break your business. 

The typical issues that arise with periodic inventory include: 

• Mistakes: Doing inventory by hand often leads to recorded totals not matching actual stock levels and recorded data. 

• Delays: Since updates only happen during scheduled counts, you won’t have a clear picture of their inventory status every day.

• Incorrect Inventory: This approach can often lead to stockouts, overstocking and costly errors. 

• Wasted Time: The whole process takes a lot of work and time, which often leads to missed sales and operational headaches.

• Poor Customer Satisfaction: If a customer orders an item online that appeared as available but is actually out of stock, they aren’t going to be pleased! 

In the current ecommerce area, this outdated approach is simply no longer acceptable. But surprisingly, not all companies have switched to the perpetual inventory model. According to research from Grainger, 59% of companies rely on real-time inventory data to enable smooth business operations.¹

This means using a perpetual inventory strategy will give you a huge advantage over the competition. As the ecommerce landscape continues to evolve, businesses that stick to outdated systems will find themselves at a significant disadvantage. No longer a “nice-to-have” feature, perpetual inventory has become an absolute necessity. 

Benefits of Perpetual Inventory Systems

Let’s take a closer look at the key benefits of implementing a perpetual inventory system in your ecommerce business. 

1. Improving Inventory Accuracy

Let face it - doing inventory by hand is prone to mistakes. Miscounts, types and missed items can lead to major problems, like having incorrect stock levels. This can cause stockouts, overselling and unhappy customers. 

Perpetual inventory solves this by automatically tracking everything whenever a transaction appears. Every sale, purchase, return or transfer is instantly recorded and your inventory levels are updated in real-time. This make sure your data is always accurate, consistent, and up-to-date.

2. Prevention of Stockouts and Overstocking

One of the biggest risks of periodic inventory is that you can’t track stock levels in real time, so you might run out of stock. This leads to lost sales and frustrated customers. On the other hand, periodic inventory can also cause overstocking. You can end up buying more inventory than you need, which ties up capital and increases the risk of products expiring or becoming obsolete. 

Perpetual inventory, with its real-time tracking, lets you keep the perfect amount of stock. With an automated tool like Goflow, you can set reorder points and get alerts when stock levels are low, making sure you restock before running out. At the same time, you can avoid overstocking by having accurate data on your sales and inventory turnover, helping you make smart buying decisions. 

3. Simplified Decision-Making

Having access to real-time inventory data makes decision-making much easier. Whether you're forecasting demand, planning restocks, or allocating resources across channels, real-time data empowers you to make informed, data-driven decisions to keep your business running smoothly.

For example, by looking at current sales trends you can anticipate what your customers need and adjust your buying and production plans accordingly. Plus, the real-time data in a perpetual inventory system will help you with pricing strategies, promotions and marketing campaigns, allowing you to optimise your sales and profits. Without perpetual inventory, you’re simply guessing based on the (likely outdated) information from your last stock take. 

4. Enhanced Customer Experience

Perpetual inventory can also help you keep your customers happy. You’ll eliminate the risk of stockouts and make sure products are available when customers want them. You’ll also avoid order cancellations, delays and backorders, which all lead to customer dissatisfaction. 

With a perpetual inventory system, you’ll be able to offer accurate product availability information to your customers. This transparency eliminates the risk of a dissatisfied customer who finds out a product is out of stock after they’ve already placed their order. 

With perpetual inventory, you can even offer features like in-store pickup or same-day delivery, because you’ll have real-time visibility into your inventory levels and can fulfill orders quickly and efficiently. This will help you improve customer satisfaction and loyalty - and keep them coming back for more! 

5. Streamlined Operations

Perpetual inventory systems rely on automation - and this is the key to streamlining your business operations. When you set up a perpetual inventory system that automates everything, you’ll make running your business SO much easier. 

You’ll save all the time you would have spent on physical counts and data entry and your team will have more time to focus on more important things. Plus, a perpetual inventory system like Goflow will integrate seamlessly with your other business systems, such as point-of-sale (POS) systems, ecommerce platforms and accounting software. This allows everything to work together efficiently, further improving efficiency and accuracy. 

Now all of your systems are running more smoothly, you’ll have more resources left over to invest in other areas like sales, marketing and customer service. 

What Should I Look for in Perpetual Inventory Systems?

When implementing a perpetual inventory system, it’s crucial to choose the right tools. Here are some key features to consider when evaluating systems for your eCommerce business:

1. Real-Time Data Syncing

Real-time inventory tracking is, by far, the most important must-have feature. Whenever an action occurs—be it a sale, a return, or a restock—the system should update stock levels instantly across all platforms. This ensures your data is always accurate, no matter where your customers are shopping.

2. Integration with Inventory Tools

Look for systems that integrate with your existing point-of-sale (POS) system, eCommerce platforms, and warehouse management systems (WMS). Seamless integration ensures inventory data flows smoothly across all channels.

3. Automation

Automated systems reduce human error and streamline inventory management processes. From tracking stock counts to updating sales, automation ensures everything runs smoothly without requiring constant manual oversight.

4. Notifications and Alerts

A robust perpetual inventory system should send alerts when stock is running low, when products are slow-moving, or when inventory anomalies occur. These alerts help you stay proactive and address issues before they affect your bottom line.

5. Reporting and Analytics

Good perpetual inventory systems offer detailed reporting and analytics to help you understand inventory performance, demand trends, and reorder needs. These insights enable you to optimize your stock levels and improve your overall inventory strategy.

Conclusion

The shift from periodic to perpetual inventory is no longer a matter of choice—it’s a business necessity. With the accuracy, efficiency, and customer satisfaction perpetual systems offer, businesses that continue to rely on outdated inventory methods are setting themselves up for failure.

If you're still using a periodic system, it’s time to make the change to perpetual inventory. With modern solutions like Goflow, you can easily implement real-time tracking that integrates seamlessly with your eCommerce operations. Stay competitive, streamline your processes, and improve your bottom line by switching to perpetual inventory today.

Start today by scheduling a demo!

¹ Supply Chain and Inventory Management Trends 2022-2023: A Grainger Report: https://grainger-prod.adobecqms.net/content/dam/grainger/gus/en/public/marketing-material/brochure/W-FMCM340_GGA_InventoryMgmt-IndustryReport_BR_FF.pdf