How accurate are your Inventory Management records?
For any warehouse, the single most important thing is inventory—the goods being brought in and shipped out. There are plenty of situations to think of which create a difference between the current stock in your warehouse and the administrative stock. For example, an incorrect scan action, a box that falls from the pallet or an item that has accidentally been returned together with the packaging, a damaged item, or errors in putting away items. Anyway, the result is the same, customer orders have some lines short. It happens to every logistics service provider.
Annual Physical Inventory is one way to clean up the inventory. It is often done once a year and is used primarily to satisfy our financial department. This accuracy is the financial Inventory accuracy. However, the manual counting of the stock is a cumbersome and therefore expensive process. First, you have to freeze your operations for a few days, then book time for your colleague, who has to count everything, compare this with the administration and register the difference and recount discrepancies and oh yes recount again. Besides being error-prone, it is also inefficient. Could this not be done in another way?
Operation Inventory Management Accuracy
If you want to have an accurate inventory all year round, you must look into a cycle counting process and develop an Operation Inventory Accuracy measurement. A typical way of measuring the operation accuracy is to count hits and misses. A Hit is when the quantity of an item, in a location and in a bin is accurate. You then divide the number of hits per the total number of counts to get a percentage of accuracy. This would become your Operation Inventory Accuracy.
When doing a physical annual inventory, it is challenging to identify the cause of the inventory discrepancies. When we do a more frequent count on items, the reason for the error is easier to trace back, and therefore applying a corrective procedure will improve the inventory accuracy.
The first step is to work to eliminate the Physical Annual Inventory and replace it with a regular Daily Cycle Counting.
Ways to Cycle Count
-Design it in a way that suits you best by dividing the annual inventory count into smaller parts and multiple moments, you spread the bother that comes with it. How you divide it, is entirely up to you. Determine the span of control, the counting frequency or the level at which you want to count yourself. Setting up your preferences can be done in no time, after which you can get started right away.
-Maximize cycle counting items when the inventory of an item is low to reduce the time spent counting and improve efficiency.
-A practical way to apply Cycle Counting is to combine it with the order-picking process. Is there an employee going to the warehouse to pick up loose packages? Then the system automatically asks to count the current stock of the relevant items.
-There is the possibility to configure Cycle Counting on customer items, where you would process Replenishment on time and additionally count inventory. In this way, you limit the risk of a shortage considerably and replenishment always takes place on time
-Easily complete assignments via RF Scanners. Chances are that you work with scanners if you are ready to introduce Cycle Counting. Here you have lots of flexibility as well. For example, employees can perform a ‘blind count’ (they enter the number without any input). Or, when a count deviates, you can show the expected amount so they can check it with a recount. You can also choose to let the staff know the differences themselves or have another extra check carried out by a second person.
3PL Dynamics Solutions’ Cycle Counting Inventory Management System module makes it possible to systematically manage real-time counts and to instantly process these administratively. Options listed above and more are configurable in our 3PL Dynamics WMS solutions. It also provides different types of layout options which you can integrate seamlessly with your warehouse processes. This way you can significantly optimize your time, energy, accuracy, and customer service.