Advantage Of Traditional Inventory Management Techniques

There was a time when there were no affordable computers or Point of Sale (POS) systems that small businesses could use. Those with large amounts of stocks, like drugstores and grocery stores, would have to deal with inventory issues. Since most of their assets are made up of inventory, a lot of effort was made to improve inventory management.

Even today, assessing the pros and cons of inventory management systems is not a simple task. Imagine how it was decades ago, when we had to do this without the aid of modern technology. While it’s good to have a modern inventory system and all the benefits that come with it, it would do you well to learn about traditional inventory management as well. Here are some of the advantages:

The old ways are more robust. The recent cyber-attack on Sony Pictures wiped out most of the computer system of the affected subsidiary. It was reported that while they were waiting for their system to be fixed, they reverted to doing their work manually. Manual systems are less likely to fail, even if they are not as quick as the computer-based tools we use today. It is hard to hack paper and pen. Most of the old inventory management techniques do not use electricity or complicated equipment, making them less prone to breakdowns.

Tracking non-critical items may be more economical if done manually. For most companies, office supplies may be monitored by stock cards. Here you can still have a running balance without the use of a computer. A running balance means that for every stock movement, the balance is adjusted. In fact, we have used thousands of stock cards to manage the inventory of a small chain of drugstores. The result was not as great as a POS system, but it does show the capabilities of such a simple system.

The old ways are cheaper. This is a controversial statement as many inventory experts would point out that in the long run, if the advantages and earnings and/or savings from the modern methods are more substantial, then it pays for itself with profit to spare. The logic is flawless except that it fails to consider the point that the total cost may be too exorbitant for some small businesses. It is not only the cost of hardware that should be considered, but also the cost of the software, training, maintenance and manpower required to operate the system.

The old ways could complement the new system. Some of the old ways could be used in combination with the current high-tech solutions. You may be able to use the previous system to cross-check the accuracy of the output of the new system.

The traditional method can be used as a fallback. The old system may be held in reserve as a back-up system. There is almost an unlimited number of possible causes for a breakdown like power failures, viruses, hardware failure, software bugs, etc. Despite all our efforts to anticipate all potential problems, so many things could go wrong. It would be a wise move to just keep your manual system in storage in case it might be needed.

The complexity of modern business and the intensity of competition today make it mandatory to use computers and other high-tech tools. This does not mean, however, that you must abandon all the old practices. Study carefully the advantages and disadvantages of using such tools. Maybe prudence would dictate that there is place for some of the traditional inventory management techniques, even if only as a back-up.

*Originally published by the Manila Bulletin. C-4,Sunday, January 4, 2015. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.