Also called continuous or perpetual inventory review, continuous review system (CRS) is an inventory control system as per which current inventory position is deducted by the units sold out to determine actual inventory reorder point. In other words, CRS determines whether inventory’s above its reorder point. Periodic review system is another method to control inventory, which is ideal for a small retail shop with limited sales.
For example, an inventory house stocks 1000 units and its reorder point is 300 units. It currently has 600 units, with a 400 units order due for delivery in three working days. Though the inventory house has sufficient units to deliver 400 units, the inventory levels will go below reorder point after delivery (600-400=200 units). The warehouse manager considers this impending scenario and requests a reorder on the day when the 400 units head out. This review system is called continuous as inventory position is reviewed after every order.
Companies that deal with high-volume sales would benefit from having a continuous review system in place. For the purpose, retailers may use barcode scanners to record customer purchases and update inventory each time the product code is scanned by the cashier.
Inventory needs to be tracked for accounting reasons. However, the method has its benefits and drawbacks. Thanks to the continuous monitoring, the management always knows the inventory status. Such up-to-date knowledge is imperative when dealing with critical items. However, continually recording the inventory amount can be costly and it just doesn’t make any business sense in a small business setup or when companies don’t deal with large volumes of sales on a routine basis.