How do you improve inventory accuracy?
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Inventory accuracy is the degree to which your physical inventory matches your records. It is essential for efficient and profitable inventory management, as it affects your customer satisfaction, order fulfillment, cash flow, and operational costs. In this article, you will learn some practical tips on how to improve your inventory accuracy and avoid common pitfalls.
Audit your inventory regularly
One of the best ways to ensure your inventory accuracy is to conduct periodic audits of your inventory levels and locations. You can use different methods, such as cycle counting, spot checking, or full physical counting, depending on your business needs and resources. Auditing your inventory helps you identify and correct any discrepancies, errors, or losses that may occur due to theft, damage, misplacement, or human error. It also helps you update your records and systems with the most accurate and current information.
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Frequency is key. How frequently you check your inventory can reduce the risk of inaccuracy in inventory levels. Theft and damages such are leakages are drastically reduced if not eliminated when audits are frequent. Also, the physical count and location should correspond to the system details. This way variances are identified quickly and rectified.
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Implement a barcode system
Another effective way to improve your inventory accuracy is to implement a barcode system that allows you to track and scan your inventory items easily and quickly. A barcode system can reduce manual data entry, human error, and duplication, as well as increase the speed and accuracy of your inventory transactions. You can use a barcode system to label your products, bins, shelves, and locations, and to scan them with handheld devices or mobile apps. You can also integrate your barcode system with your inventory management software or ERP system to automate and synchronize your inventory data.
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I agree with finding ways to simplify the process: this is key in not only optimization but also in making the job easier for teams, giving them space for continuous innovation efforts. 💡
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Train and motivate your staff
Your staff plays a crucial role in maintaining and improving your inventory accuracy. Therefore, you need to train and motivate them to follow the best practices and procedures for inventory management. You can provide them with clear and detailed instructions, guidelines, and checklists for handling, counting, scanning, and reporting inventory items. You can also monitor their performance, provide feedback, and reward them for achieving high inventory accuracy. Additionally, you can encourage them to report any issues, problems, or suggestions that may affect your inventory accuracy.
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Inventory staff can be early or mid career. By having consistent and quality training materials, it helps standardise your warehousing and inventory control with your organisation as people leave or join the business. It also helps reduce potential operator variance, and encourages good stock control and warehouse housekeeping consistent with 5S practises. Inventory control can appear to be given, or routine, but the costs of training and compliance with cycle counting and record keeping can truly be offset with reduced ullage, and improvements to order accuracy. It is good practice to provide formal induction plans and periodically check in with operational staff, if they are in fact using the system and supporting metrics.
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Optimize your inventory layout and storage
The way you organize and store your inventory can also have a significant impact on your inventory accuracy. You want to optimize your inventory layout and storage to make it easy for your staff to locate, access, and manage your inventory items. You can use techniques such as ABC analysis, FIFO method, or zone picking to categorize and prioritize your inventory items based on their demand, value, or turnover. You can also use labels, signs, or color codes to mark your inventory locations and bins. Furthermore, you can keep your inventory storage clean, tidy, and safe to prevent any damage, loss, or confusion.
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Great warehouses have thought in terms of material flow, how to move material from receiving, through to storage, finishing, packing and despatch. The intention of lean warehousing is to reduce the amount of internal warehouse transfers, logistics (even down to footsteps) and stage material in a way that promotes order picking accuracy, the preventing of spoilage, damage or theft. Material such as dangerous goods, chemicals may need specialised or contained storage, and may have limits on how much can be stored on site. Warehouse design may require an element of consideration of gold housekeeping how to keep dust and debris or unwanted packing materials away to limit hazards, as well as limiting mobile plant for safety purposes.
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Review and improve your processes
Finally, you need to review and improve your processes for inventory management on a regular basis. You can use tools such as KPIs, reports, or dashboards to measure and monitor your inventory accuracy and identify any trends, patterns, or issues that may affect it. You can also use methods such as root cause analysis, SWOT analysis, or process mapping to analyze and evaluate your current processes and find any gaps, inefficiencies, or risks that may compromise your inventory accuracy. Based on your findings, you can implement changes, improvements, or solutions to optimize your processes and achieve higher inventory accuracy.
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Good internal dashboards can be cross functional, it may show operationally the amount of lines despatched, amount of outstanding receipts or cycle count activity, inventory valuation, storage capacity, amount of empty pick locations by type. Also, there can be loss traceability reports, i.e. where inventory movements have happened, to what location, from what supplier, to what customer to assist with traceability to the point of conducting loss investigations. To optimise operations, periodically, material can be internally restaged in the warehouse, to move higher velocity items closer to picking and packing areas, or within shelf height, or relocation of seller moving items into bulk or medium term storage. Slow movers can be sold off.
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Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
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Inventory accuracy, which reflects how well your physical inventory aligns with your records, is fundamental for successful inventory management. It influences customer satisfaction, order fulfillment, cash flow, and operational costs. While regular audits, barcoding, staff training, and optimized layout are key, I advocate for integrating real-time data analysis. Real-time data allows you to promptly identify discrepancies, correct errors, and respond to demand fluctuations more effectively. By embracing real-time data, businesses can be more agile and responsive.
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