Inventory accuracy is vital to an organisation’s long-term success. Profits depend on the sale of inventory stock and if you don’t know what or how much you are selling then you could be missing an opportunity to maximise sales.
Having poor and inaccurate inventory control can be costly because it causes issues such as unplanned stock-outs, the shipping of wrong products to customers, wasted resources trying to locate misplaced items and inventory shrinkage.
The good news is that there are many ways for companies to improve their inventory accuracy, here are just three.
Inventory control strategies
There are various programmes of quality inventory control available for companies to adopt such as JIT, Lean Manufacturing, Six Sigma and Total Quality Management. Know your current inventory accuracy rate so that you are aware of what you are working with.
Weigh up the pros and cons of each method to understand the system that will work best for your business and stick with it. Ensure that everyone in the company takes ownership of inventory accuracy and that they receive the necessary training to support and implement inventory control programmes. This also means that individual business units need to understand how their functional area directly or indirectly impacts inventory accuracy.
Check your results regularly to make sure you are achieving and sustaining continuous improvement and inventory accuracy.
Inventory management software saves time and resources, it enables greater visibility, better inventory accuracy, speeds up processes and removes the scope for human error.
Technology such as wireless RFID tags and sensors can greatly improve inventory accuracy and RFID devices will integrate with a warehouse management or inventory control systems, updating data to provide accurate details of the movement and location of stocked items.
With numerous inventory management systems to choose from, it is important to select a method that is right for your specific needs, one that will adapt and grow with your business.
Traceability is the capacity to track items back to their original source, together with information on each place the stock moved, or any time it was handled. Establish product traceability throughout your entire inventory channels by choosing supply chain partners who offer systems that are compatible with your inventory systems, vastly improving end-user delivery accuracy and customer service satisfaction.
Traceability also helps companies to effectively prevent costly waste by pinpointing the processes where waste occurs. Improving traceability is a major step in reducing waste. Ensure that no product is ever moved unless the movement is authorised and recorded.
Without reliable traceability, it’s difficult for businesses to locate the source of inventory discrepancies, meaning it is impossible to implement the right solutions.
Using cycle counting is one of the best ways to identify problem areas and to maintain high levels of inventory accuracy. An effective cycle counting program is a valuable way to improve accuracy because you are undertaking partial physical counts every day until you have cycled through your entire inventory stock.
Cycle counting is continuous, when you finish one cycle, you start the next. With cycle counting, you can potentially eliminate the need for full physical inventory counts that disrupts operations and take employees away from their primary duties. Cycle counting can be integrated into normal daily operations.
Why it matters
Inventory accuracy is one of the most important aspects of supply chain management, valuable resources are tied up in inventory stock. Knowing exactly what you have and where it’s located is critical to managing stock, avoiding high carrying cost and shipping orders to customers efficiently and on time.
Effective and accurate inventory control is crucial to maintaining the right balance between customer satisfaction and company revenues.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.