A stock take discrepancy can present a real problem for businesses, potentially costing the bottom-line in lost sales, build-up of surplus stock, and perhaps most detrimentally – creating dissatisfied customers. Accurate stock recording and inventory management are essential to understanding a company’s true capacity to meet and capitalise on market demands.
Stock take discrepancy happens
It happens. Every business tasked with maintaining and controlling inventory will likely face stock take discrepancy issues at least once. It’s to be expected when modern businesses have so many supplies channelling in and out of their operations. While candy bars don’t fly off the shelves by themselves, it’s understandable that some quantity of candy bars and supplies might go missing or become damaged during the manufacturing process. Boxes are easily misplaced or mislabelled, quantities can be mistakenly measured, and ingredients can perish. And, while it’s not nice to imagine, it’s easy to see that candy bars might tempt the tastebuds of potential thieves and pilferers.
What are the causes of stock take discrepancy
A discrepancy between the level of actual stock held by a company and stock shown in inventory records can be caused by a number of related and unrelated factors, which will depend on the industry in which a company operates and its inventory record-keeping methods.
Damage or deterioration
Loss of inventory can be caused by unanticipated damage to stock and the undesired deterioration of perishable inventory. Inventory can be damaged in storage and rendered unusable.
Whilst stock take discrepancy due to damage or perishing can be forgiven and prevented against with proper operational planning, the other causes of stock take discrepancy tend to be the result of human error and procedural flaws.
Most commonly, stock take discrepancy is caused by either an error in physical inventory management or data/stock management procedural errors.
- Incorrect physical inventory management – items can be placed in the wrong location, or stocks can be mixed or mislabelled. Materials can be measured incorrectly and units of measurement mistakenly recorded
- Incorrect data entry – discrepancies arise most obviously when employees fail to update inventory management systems/records. Stock counts will always be off if accurate records and databases are not maintained
Stock take discrepancy is least easy to accept when caused by human impropriety, such as theft or pilferage – that is, a reduction in inventory due to shoplifting, or petty thievery by employees.
Another improper cause is supplier fraud, where a supplier delivers a lesser quantity of material than promised.
The most common way to detect stock discrepancies is by doing stock takes or cycle counts on a regular basis, to identify discrepancies early and reduce risk of interruption to production cycles.
Once detected, it’s important to rectify discrepancies and implement operational procedures and security measures to ensure accurate and reliable inventory management.
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.