## Physical Control of Inventory
Three systems are used to keep physical stock under control.
### (i) Two-Bin System
Inventory is stored in two sections within the same bin:
- One section holds minimum / re-order level stock.
- The other holds usable stock.
How it works:
- Issues are made from the larger (usable) section.
- When stock enters the re-order level section, a new purchase order is placed.
- Supports bin card and store ledger records.
### (ii) Inventory Budgeting System
A budget is prepared for inventory needs based on production plans.
- Controls inventory investment.
- Prevents overstocking.
- Based on production schedules and material planning.
### (iii) Perpetual Inventory System
A system of continuous record-keeping and verification maintained by the store department.
Records used:
- Bin Cards → track quantity.
- Store Ledger → track quantity + value.
Steps for success:
1. Maintain accurate ledger quantities and values.
2. Maintain stock control (bin) cards.
3. Reconcile records regularly.
4. Physically check stock daily by rotation.
5. Investigate discrepancies promptly.
6. Make corrective entries if needed.
7. Eliminate the root causes of discrepancies.
> Don't confuse Perpetual Inventory System (continuous records — bin cards + ledger) with Continuous Stock-Taking (continuous physical verification). They complement each other.
### Advantages of the Perpetual Inventory System
- Flexible stock checking: physical stock can be verified and book balances adjusted at any time, without waiting for a full stock-take.
- Quick financial reporting: ready stock data speeds up interim Profit & Loss accounts.
- Timely discrepancy detection: mismatches are spotted early, enabling prompt corrective action.
- Identification of idle stock: surplus, obsolete, dormant or slow-moving items are caught early and disposed of in time.
- Better stock control: helps fix stock levels and triggers timely purchase requisitions.