An inventory system is a method used by businesses to track and manage their stock of goods. It helps companies know what products they have, how much is available, and when to reorder. This system can be manual, using spreadsheets, or automated with software that provides real-time data. There are different types of inventory systems, such as perpetual and periodic. A perpetual inventory system continuously updates inventory records with each sale or purchase, while a periodic inventory system checks stock levels at specific intervals. Both systems aim to optimize inventory management and reduce costs.