10 Tips to Make Physical Inventory Counts Less Painful and More Accurate

Given the option of getting a voluntary root canal instead of physically counting inventory, many of you would likely being calling your dentist right now. Certainly, physical inventory can be a painful process, especially for the many small businesses doing their best just to get orders out the door. However, accurate inventory can help reduce a long list of problems with which many small businesses are familiar:

  • Wasting time looking for items
  • Holding extra inventory as a safety stock against inaccurate numbers
  • Avoiding orders for older items because you’re not sure you still have what your system says you do
  • Expediting reorders because you suddenly can’t find any more of the product

Below are ten tips that will make physical inventory counting much smoother, so you can quickly get back to helping your company make money.

1 – Make Inventory Accuracy a Higher Priority than Order Fulfillment

Raising the priority of accurate inventory is perhaps the most important, yet most difficult, step in inventory accuracy. Many inventory problems arise from pushing a transaction through the system with the intent of going back and fixing the numbers later. In the rush of other emergencies, however, we often forget to go back and correct the numbers in the system. This leads to missed production entries, negative lines of inventory, and a whole mess of other problems. Only by putting systems in place that will prevent an employee from moving forward without the necessary system transaction can you effectively keep accurate records of inventory.

One example of success that my team recently implemented was changing our accounting system so that it will not process any shipment that contains more inventory than we have on hand. For example, if we’re trying to ship 15 of an item, but our system says we only have 5 in stock, then an alert will pop up and force us to fix the problem before moving forward. This helps us address problems before the product goes out the door. By forcing us to address missed production entries before the product leaves, our modified system helped us eliminate most of our major inventory issues.

2 – Put Everything in a Marked Location

When the time comes to count inventory, having everything in a marked location is a necessity. Those loose boxes and stray pallets without a home are often the problems that come back to haunt you while you try to reconcile. Even if you must make new, temporary locations for the duration of the count, put everything in a well-marked and defined place, and leave it there.

3 – Reduce Inventory as Much as Possible

Do all you can to count as little inventory as possible. Whether it’s holding up an inbound shipment a couple days, or shipping extra in the days prior to the count, counting less means fewer chances for mistakes. You’ll also want to be sure to not receive or ship any product during the count, since this can easily cause discrepancies.

4 – Count Additional Stock Locations Beforehand

Even before the count has started, counting the additional stock locations beforehand can mean much less counting on the days that inventory is frozen. Fully stocking the picking locations first, then wrapping and marking the count of additional stock location can drastically reduce the stress on count day. However, be sure that if inventory is taken from the additional stock location, the count tag is either removed or adjusted to the lower quantity.

5 – Be Visual with Counts

With so many people counting, keeping track of what has and has not been counted can often be difficult. To avoid confusion, be extra generous with visual labels and controls. Large count tags, bright colors, and unmistakably clear signs can save you hours of confusion later on. Especially if you are bringing in employees or temps unfamiliar with your product, erring on the side of too big and obvious can be well worth the expense. If something is not in inventory, mark it so even those with the poorest of eyesight can easily understand to not count the product.

6 – Have Someone Familiar with the Product on Every Count Team

Another problem that I often encounter is the unit of measure of items to count. Is an assortment of 24 items in inventory as 1 pack or 24 each? While box markings can help, nothing replaces an experienced team member. If you bring in additional people to help count, be sure to include someone who knows the products well on each team. Partnerships with one experienced person and one new work well.

7 – Be Quick and Creative with Immaterial Counts

Some small items aren’t worth the effort to count individually. Whether its tiny plastic bags, plastic hooks, tons of grain, or gallons of chemicals, physically counting out the amount is often not worth the value of the product. For large quantities of small items, a sensitive scale is the best method. Weighing out a sample and then calculating piece count from the total weight is accurate enough for an inexpensive component. For large quantities that are difficult to weigh, calculating volume by lead lines and extrapolating is preferable to simply guessing.

8 – Audit Counts Right After the Count Starts

Auditing counts are essential to ensure each team is counting the products correctly. However, if you wait until all the counting is done, you can’t do much but go back and recount whatever that team counted. Instead, auditing counts from each team soon after they start gives you an opportunity to correct any problems and train more to avoid future miscounts.

9 – Discipline Yourself to Regular Cycle Counts

As your to-do list grows, taking time to cycle count is likely to slip to the very bottom of your priorities. However, installing incentives and consequences to ensure regular cycle counts happen will not only reduce the pain of a complete physical count, but also give you more confidence in your system’s numbers throughout the year. Whether you schedule your cycle counts based on ABC analysis, items likely to have problems, or some other method suited to your business, rotating through items helps catch inventory issues before they become larger problems.

10 – Review Problems and Change

Finally, after you’ve recorded your last counts and everything is reconciled in your system, take a few minutes to reflect. Gather the team together and review what problems you encountered. What went well? What caused problems? Most importantly, what can you put in place to avoid these same problems in the future? Each small change you put in place today can save your team headaches in the future.

Alex Fuller helps small businesses tame the wild west of supply chain management. Please visit
http://www.supplychaincowboy.com”>http://www.supplychaincowboy.com and subscribe to his weekly articles.

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