Importance of Physical Inventory Counts
After people, inventory is the most valuable asset for businesses. The accuracy of your inventory impacts things like your business’ taxes, your ability to properly slot and store product, customer satisfaction, and profitability. Ultimately, your processes need to align with your inventory accuracy to create return on investment (ROI).
A Manual Count is often completed with pen and paper and/or in an Excel spreadsheet then keyed into a computer. Inventory adjustments are made after the count is completed. These manual processes create greater potential for mistakes and human error.
With Mobile Counting, everything in the process – item counting, data review, inventory adjustments, approvals, and more – all happen in the same system in real-time. This instant data capture decreases the risk of inaccuracies significantly.
Within mobile counting, there are two categories:
- Physical Inventory Counting (mobile) can be performed using a directed, scheduled, or manual approach. Advanced physical counting software solutions do not require a pause in warehouse operations to complete these counts.
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A Cycle Counting Program (mobile) is a type of warehouse management technique where a subset of inventory is counted in specific locations, bins, inventory items, and days, on a recurring schedule. It allows visibility into product location, movement, and related employee activity at all times. Like many Physical Inventory Counting methods, advanced Cycle Counting software does not require a pause in warehouse operations to complete.
Benefits of a Mobile Physical Count
Performing a Full Physical Inventory Count with a mobile barcode scanner provides a comprehensive picture of what is available in your warehouse. For the most up-to-date, accurate view of your inventory, perform a Full Physical Inventory followed by regular weekly or monthly Cycle Counts. Ultimately, Physical Inventory Counts can help recognize and correct discrepancies in your stock records, leading to fewer human errors and increased accuracy.
Customer Experience
For Cynthia Xin, Managing Director at PAC Trading, counting is the biggest value add of RF-SMART. By implementing RF-SMART's mobile scanning functionality, they have limited the number of recount inquiries. “I've been in warehouses where the whole warehouse had to shut down for three days while they prepare for the stock count. Then it takes you a day to do all the adjustments with all the recounts. With RF-SMART, you don't have that because it's already so accurate,” said Cynthia. Now, they have improved their efficiency by 30% when compared to their previous counting processes.
Customer Experience
The Artos team was also looking for a better way to navigate their inventory movements throughout the warehouse. With RF-SMART’s flexible counting options, they were able to find the inventory visibility they wanted. This functionality has allowed Artos to allocate inventory for orders and still maintain a high level of accuracy in their stock. This change has had a significant impact on not only their supply chain accuracy but their overall bottom line. Their team was able to decrease their written-off inventory by 78% in one year due to the increased accuracy and visibility brought by RF-SMART.
Customer Experience
Before RF-SMART, Gump's was unable to employ consistent and accurate inventory counts. Counts are now being completed quickly and with less stress on individual teammates. “[RF-SMART has] really improved the speed at which we can get a count done and audit that count,” said Leo Moran, Warehouse Operations Manager at Gump’s. This improvement has turned a historically painful piece of their supply chain into a streamlined process. “Utilizing RF-SMART Stock Counts has led to huge gains in our inventory control and efficiency.
Risks of Manual Physical Counting
Improper manual counting processes are gateways to inventory inaccuracy and order fulfillment errors, both of which are the enemy of any successful inventory management program. Inventory inaccuracies can have significant negative impacts on the bottom line of a business and decrease customer satisfaction and retention.
Let’s be honest – nobody enjoys counting inventory. If you’re currently performing Physical Inventory Counts manually, chances are you are leaving a large margin for error. The accuracy of a manual count is compromised as soon as your staff records an item’s quantity, location, or name incorrectly. Manual counting sets you up for a series of costly consequences, such as the accrual of obsolete stock or inaccuracies when fulfilling sales orders.
Additionally, manual counts are more time consuming and will usually require you to pause all other warehouse activities – meaning order fulfillments come to a halt and productivity is impacted.
There are other risks to consider, including time and overall cost.
Cost
There are tangible and intangible costs to consider when implementing a counting process. Certainly, paying labor and lost inventory have some of the biggest financial impact, but downtime and inaccurate inventory can cost you customer satisfaction as well. Below are some cost considerations to consider across counting methods:
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Why does Physical Inventory Counting Matter to my Operations?
When done correctly, a Physical Inventory Count can be a game-changer for your inventory control. It can help you identify inventory processes and allow you to build new healthy inventory habits for the next year. Once you’ve had a successful Physical Inventory Count, you can start the process of weekly or daily Cycle Counting – potentially avoiding a physical inventory in the future.
Ultimately, having the right tools and systems in place during your Physical Inventory Counts is going to make the process quicker and easier. Automating your warehouse counts eliminates error-prone manual input of inventory and can ensure your inventory is 99% accurate, allowing you to detect stock level variances in real-time. Scanning to identify products by their barcode and bin location eliminates the need for printing paper count sheets that are difficult to manage and easy to lose.
One tool that can have a big impact is using NetSuite barcode scanning software, such as RF‑SMART's WMS.
RF-SMART's suite of solutions addresses various inventory management needs, including shipping, printing, and hardware. A Built-in-NetSuite solution, RF-SMART extends NetSuite to the warehouse floor via mobile handheld scanner devices that have value-added features such as stock counting and Cycle Counting. With 40+ years of software experience and more than 2,500 global customers, RF-SMART has the resources and dedication to assist you with even the toughest counting challenge!
Preparing For The Count
Clean Up
For the most accurate data, you must start by physically tidying up your warehouse. Make sure aisles are clear, inventory is visible, and put items where they are supposed to go ahead of conducting your count. Close up full boxes or label wrapped pallets to minimize counting work.
Set a Realistic Timeframe
Remember, you’re trying to count everything within a reasonable timeframe for your warehouse! Most Physical Inventory Counts will take multiple days if counting without scanning technology. When setting your timeframe, consider the square footage of your warehouse, the size of your team, and the amount of inventory.
Assemble a Dedicated Team
Make sure your counting team members are trained and understand your process. You may need to include additional staff or designate leaders within the staff to help delegate and answer questions.
Choose the Right Time to Count
It’s important to consider the time of year you’re counting, and more specifically, the time of day. Many companies choose to conduct counts during the end of their fiscal year, their slow season, or when their inventory is at its lowest (example: after a big sale).
Get Your Paperwork in Order
When counting without technology, such as a mobile barcode scanner, you will need to prepare and print inventory count sheets. This will take some organization and thought, so allow plenty of time for preparation!
During Your Physical Inventory Count
Follow the Process
Accuracy and consistency are the name of the game when it comes to counting! If you aren’t using technology to validate counts, the best practice is to count in teams of two. You may also consider creating a procedure for marking bins that have already been counted or that do not need to be counted. Many businesses leverage painter’s tape or colorful dot stickers to denote inventory that has been counted.
Address Errors
Ensure there is some notation plan for documenting discrepancies in your stock so they can be handled by accounting. One way this can be done is by highlighting lines on the count sheet where there is a need for review.
Safety Considerations
Anyone in the warehouse operating heavy machinery, such as forklifts, should be licensed and using the proper PPE. Never take unnecessary risks to count inventory, such as scaling high racking without the proper training or equipment.
Utilizing Technology & Software in the Counting Process
Leveraging technology, such as a barcode scanner and a warehouse management system (WMS), can make your counting process quicker and more efficient. Not only does this technology reduce or eliminate the need for additional staff, but it also typically creates significant time savings. Certified barcode scanners are also able to scan inventory from many feet away, mitigating the risk of employees needing to get on ladders or forklifts to count.
Post-Counting Actions
Updating Inventory Records & Systems
Once your inventory has been counted, it needs to be updated in your system of record. This is a long process without data capture technology, as it requires manual data entry and uploads. This multiple-step process exposes your company to a greater risk of human error and inaccuracy.
Adjusting Financial Statements & Accounting Records
After the data has been transferred to the system of record, it’s time to assess its impact on financial statements. Most people conduct a count to comply with an accounting or auditing process and ensure their tax bill is accurate. As long as your inventory records are accurate, you should be able to assess if you made money, lost money, or broke even.
Continuous Improvement Strategies
Implementing technology in your counting process is a guaranteed way to improve efficiency and user morale during counting season. Moreover, automated data capture software can eliminate post-count data entry, as variances are calculated in real-time, allowing you to provide the most accurate picture of your inventory and eliminating human error.
Customer Experience
"Because of RF-SMART, I can now spend the holidays with my family. In the past, we worked long hours during our busy season doing our annual count, but there’s no need for that now. We have an ongoing cycle counting all year long so there's not a rush at year end."
RF-SMART Customer>
Ecommerce Industry
