Briefly explain each of the three primary inventory systems

What will be an ideal response?

Answer:
? Perpetual inventory systems are designed to maintain a running count of the items in inventory. Although a number of different perpetual inventory systems exist, they all have a common element: They keep a continuous tally of each item added to or subtracted from the firm's stock of merchandise. A typical system uses a perpetual inventory sheet that includes fundamental product information such as the item's name, stock number, description, economic order quantity (EOQ), and reorder point.
? Visual Control System: The most common method of controlling inventory in a small business in which managers simply conduct periodic visual inspections to determine the quantity of various items they should order. As mentioned earlier, manual perpetual inventory systems can be excessively costly and time-consuming. These systems are impractical when the business stocks a large number of low-value items with low dollar volumes. Therefore, many owners rely on the simplest, quickest inventory control method: the visual system. Unfortunately, this method is also the least effective for ensuring accuracy and reliability. Oversights of key items often lead to stockouts and resulting lost sales. The biggest disadvantage of the visual control system is its inability to detect and to foresee shortages of inventory items.
? Partial Inventory Control System: For small business owners with limited time and money, the most viable option for inventory management is a partial inventory control system. These systems rely on the validity of Pareto's Law (80/20 rule) which states that roughly 80 percent of the value of the firm's inventory is in about 20 percent of the items in stock. Because only a small percentage of items account for the majority of the value of the firm's inventory, managers should focus control on those items.