How to Ensure Inventory Accuracy
Inventory management has a huge impact on the profitability of an
Set minimum/maximum levels for each SKU
Obviously, you can’t tell whether you’re carrying too much or too little inventory unless you establish standards. Establishing a minimum and maximum stocking level for each item enables you to know when to reorder or when you have too much of a given item.
The challenging part, of course, is determining what the minimums and maximums should be. Demand, purchasing price points and lead times are usually the main drivers. If an item has a
In terms of maximums, if you are turning your inventory four to eight times a year, you’re doing a terrific job of inventory management. With that in mind, a
Physically count your inventory
Over reliance on computerized inventory management systems puts your business at risk. Inventory management systems are reliable, but can be thrown off by entry errors (e.g., entering the wrong item or quantity on shipping document) or physical errors (e.g., picking the wrong item or quantity).
There’s no substitute for physically seeing what you have on the floor. A complete physical inventory should be taken at least once a year, and physical cycle counts should be taken on a regular basis as a way of systematically spot checking inventory accuracy. This can be a simple process if you’re just starting out, with a small space for your entire inventory. When you’ve reached a volume of inventory that requires a warehouse, checking the inventory physically can be time consuming but well worth the time in the long run.
Make sure products are clearly labeled and have a specific storage location. This facilitates easy counting as well as reduces the chances for shipping errors. When you uncover discrepancies between physical counts and computer system counts, review the item’s sales and purchasing history to identify how the problem occurred. You may find the discrepancy was caused by a
Be mindful of theft
Products sometimes have a way of disappearing from the warehouse; and
Sometimes, however, theft can be organized and occur on a large scale. This is another important reason why inventory discrepancies must be resolved. If no error can be identified in the system, especially if discrepancies occur frequently, theft could be the cause.
When you have a sizeable inventory, implementing simple security measures such as limiting warehouse access to specific employees and installing security cameras at exit points can help tremendously in reducing your exposure. Limiting warehouse access also promotes safety — people unfamiliar with warehouse operations sometimes go where they shouldn’t. On a smaller scale, limiting access to the storeroom and keeping the storage area locked at all times can reduce theft and disappearing items.
By maintaining an accurate inventory, you’ll be able to deliver on time while keeping your operation efficient and profitable.