A Business Encyclopedia

Computerized Inventory Control System

Definition: 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.

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.

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