Why are periodic reviews important for inventory management?

Periodic reviews play a crucial role in inventory management, specifically through the assessment of the accuracy of inventory records and necessary adjustments to stock levels. This practice ensures that the data recorded in inventory systems accurately reflects actual stock on hand. Regularly verifying this information helps identify discrepancies caused by theft, damage, or errors in recording transactions.

By conducting these reviews, organizations can maintain optimal stock levels, preventing both overstocking and stockouts. Overstocks lead to increased holding costs and waste, especially for perishable items, while stockouts can result in lost sales and dissatisfied customers. Therefore, the ability to adjust stock levels based on up-to-date information from periodic reviews leads to enhanced operational efficiency and improved service levels.

This proactive approach not only aids in maintaining an accurate inventory but also supports better decision-making regarding purchasing and resource allocation. Consequently, it empowers the business to respond more effectively to market demand and changes, which are critical for maintaining a competitive edge.