Discover the keys to a successful inventory. Whether you’re new to inventory management or a seasoned professional, this article provides you with the methods you need to carry out an accurate and efficient inventory. Learn what’s involved, how to go about it step by step, and which tools can turn this task into a serene experience.
More than just counting products, inventory provides an accurate, up-to-date snapshot of your stock, ensuring that your resources match the data you’ve recorded. A poorly managed inventory can lead to out-of-stock sales, financial losses and damage to a company’s reputation.
However, given the multitude of possible methods, tools and approaches, one question remains: how can an inventory be carried out methodically, accurately and efficiently?
Definition of physical inventory
The physical inventory, a crucial stage in the life of a company, represents the meticulous procedure of listing and evaluating all the goods in stock. This process highlights the discrepancy (or otherwise) between what is reflected in your records or computer systems and the reality of your inventory.
The result of this meticulous exercise is more than just a numerical report. It enables the warehouse manager to understand major variations and discrepancies. What’s more, it offers recommendations for better inventory management, taking into account the specific features of a refrigerated warehouse, for example.
But beyond these technical details, the inventory is first and foremost used to evaluate the company’s stock – goods acquired but not yet sold, whether they are in storage, in the production phase or even ready for sale. This periodic assessment is vital not only for efficient management, but also to ensure the accuracy of the company’s accounts.
The different types of inventory
Inventory management is an essential task for every e-business. To keep accurate track of your merchandise, it’s essential to understand the different types of inventory counts. Depending on your company’s needs and the frequency of your inventory counts, several inventory methods can be adopted.
Rotating inventory
In this approach, items and units are counted at defined intervals, whether monthly, quarterly or at any other rate decided by the company. These counts are generally scheduled at times of low activity, to minimize disruption to daily warehouse operations.
Permanent inventory
This type of inventory relies on the use of specialized warehouse management software. Stock information is constantly updated, enabling real-time tracking of goods movements without business interruption. Adopting this approach has significant advantages, particularly for replenishment management, making the purchasing department’s work smoother when it comes to renewing references.
Annual inventory
French law requires every company to carry out an annual inventory, i.e. a complete count of goods, usually aligned with the close of the financial year. This solution is particularly well suited to companies managing a limited number of references. However, the limitation to a single annual inventory can make it difficult to detect deviations quickly and implement corrective measures.
Why do an inventory?
Inventory is much more than a simple counting exercise. In fact, it is a crucial analytical approach offering a multitude of advantages. Firstly, it plays a key role in optimizing management, enabling you to detect and avoid errors that could compromise the judicious use of your resources.
What’s more, by assessing the precise value of your inventory, you gain vital information for financial decision-making and effective cost management. What’s more, the inventory informs you of the availability of your merchandise, highlighting what’s in stock and what’s missing, resulting in a noticeably improved customer experience.
It should be noted that in many jurisdictions, including France, inventory is not an option, but an annual legal obligation for companies. Identifying possible discrepancies (those troubling discrepancies between what you think you have and what you actually have) could signal problems such as theft, loss or other irregularities. Not to mention the fact that continuous inventory monitoring can save you unnecessary procurement costs.
In short, the inventory should not be seen as an administrative chore. It is, in fact, essential for ensuring your company’s financial robustness, operational efficiency and regulatory compliance. So it’s imperative to approach it with the seriousness and regularity it deserves.
How do you make an inventory?
Inventory is much more than a simple formality or administrative task for e-businesses. It’s a key moment for understanding, evaluating and managing the heart of your business: your products. By carrying out an accurate and organized inventory, you lay the foundations for optimized stock management, essential for meeting your customers’ needs and ensuring the long-term future of your business.
Pre-inventory preparation and organization
It’s essential to start by defining a methodology adapted to the nature of your inventory. Whether they are classified as merchandise, raw materials, semi-finished products, work-in-progress or fluid stocks, the way in which you quantify them (units, volume, weight, economic value, etc.) requires careful thought. A common approach is to use the ABC method to prioritize items according to their rotation, but you could also consider organization by zones or product families.
To ensure that your inventory runs smoothly, it’s essential to prepare your team thoroughly. Everyone needs to know the steps to follow, the areas to cover and how to handle the tools provided, not forgetting specific guidelines such as disposing of any obsolete or faulty stock spotted.
The date chosen for the inventory is also crucial. Ideally, you should opt for a period with little or no inventory movements. Some companies even choose to close temporarily during this period to ensure perfect stock stasis. If your business is seasonal, choose a time when stocks are at their lowest.
Counting and recognition of stock items
When it comes to inventory, there are several methods at your disposal:
- Manual counting: if you have limited stock, this is the obvious choice. Simply open your storage space and count each item by hand.
- Periodic counting: this involves comparing the inventory at the start of a given period with that at the end of the same period.
- Weighted average cost: this method takes the cost of newly acquired inventory and blends it with the cost of existing inventory to determine a weighted average. The amount is adjusted as new acquisitions are made.
- LIFO (Last-in-First Out): with this solution, the most recently acquired items are considered to be sold first.
- FIFO (First-in-First Out): the opposite of LIFO, this method assumes that items that have been in stock the longest are sold first.
If your inventory is vast, a barcode scanner can be very useful. These devices automatically count each item in a matter of seconds, with impressive precision. For those who can’t be physically present or who have a huge stock, certain applications allow you to carry out the inventory remotely. You can upload photos or videos of the products, and someone else can count them up later via the same application or website.
Verification by double counting and comparison of data
In an optimal scenario, your physically counted quantities perfectly match the quantities recorded in your IT system. However, operational reality often shows differences between these two figures. For each article reference, it is essential to juxtapose the quantities recorded in the system and those actually counted. If a discrepancy occurs, several actions are required.
For products where physical stock is lower than theoretical stock, a recount is essential. If the discrepancy persists, it’s crucial to investigate possible administrative errors in stock removal. Conversely, if the physical stock exceeds the registered stock, after a recount, it is advisable to check for any errors during a stock entry.
Inventory regularization and finalization
Once your count is complete, it’s essential to regularize the value of your book inventory. This step enables us to adjust the book value according to the items actually present and their conditions. For example, it may be necessary to reduce the value of stock to reflect missing or depreciated products, just as it may be essential to increase the value of stock if previously unrecorded items are discovered.
Finally, be sure to meticulously record any discrepancies observed during this exercise. Then integrate these adjustments into your accounts, transferring the amounts to the appropriate accounts if necessary. It’s crucial to remember that stocktaking has a major impact on your company’s accounts , particularly in terms of carrying over unsold or unused inventory to the following year.
Inventory tools
When it comes to inventory, the efficiency and accuracy of the tools used determine the quality of the final count. From traditional methods to the latest innovations, it’s essential to find the right tool for your business.
Inventory on paper or via Excel
One of the most basic methods of taking inventory is to use paper. This solution is generally suitable for companies with low inventory levels. However, without an appropriate inventory management tool, this method can expose the company to a number of costly errors. In this approach, operators compare physical stocks with a printed list, making it an essentially manual and error-prone procedure.
To modernize this process a little, some are turning to Excel. Thanks to Excel, the inventory can be partially automated to facilitate certain calculations. What’s more, extensions can be added to integrate data from barcode scanners, speeding up information capture. However, despite its advantages over paper-based solutions, Excel also has its limitations in terms of errors, and doesn’t always guarantee optimal inventory management.
Inventory via a WMS (Warehouse Management System)
E-commerce WMSs have revolutionized the way inventories are carried out, bringing accuracy and speed, especially for companies with a wide range of SKUs. In complex environments, where inventory counting can be a Herculean task, the use of a WMS considerably minimizes the risk of error.
For example, Shippingbo’s WMS enables :
- Automated order picking
- Real-time inventory management
- Centralized stock levels for multi-warehouses
- Simplified pack configuration.
Optimized inventory with Shippingbo
In short, inventory is a central pillar of effective e-commerce management. It ensures data accuracy, improves financial health, and above all, plays a crucial role in delivering the customer experience. An organized method, combined with the right tools, is essential to ensure that this exercise is both productive and pain-free.
But remember, the right tool makes all the difference. With Shippingbo, you can simplify this process considerably. Our WMS, specially designed to meet the needs of e-tailers, will centralize and automate your processes so that your inventories become serene moments of verification rather than headaches. Why not make the leap to optimized inventory management?
Watch the replay of our webinar on one of the features offered by Shippingbo’s WMS!
