The Importance of a Regular Inventory Count and How to Automate Them

Use inventory counts to improve your inventory management

Whether you’re new to the game or an industry veteran, you already know regular inventory counts are important. That doesn’t make the task any more fun, or any less daunting. In this article we share tips to make stock counting easier by covering:

  • What is an inventory count?
  • Why it’s important
  • Types of counting inventory
  • Using technology for stock counting

What is an inventory count?

An inventory count, or a stock count, is the practice of tracking the inventory items in your warehouse that are available and awaiting sale. There are a number of ways to count your inventory and which one is best for you depends on details such as the size of your business, how often you perform counts, automation and more.

Why it’s important

At its most basic level, inventory counting is important because it allows you to know how much inventory is on your shelves at that given moment. However, there are many other reasons why taking regular stock counts are necessary. A few of those include:

  • Preventing stockouts or overstocking: Keeping regular count of your inventory gives you more information for demand forecasting. Better planning leads to optimized stock levels, meaning less revenue lost.
  • Identifying and preventing loss: Understanding what’s on your warehouse shelves helps you identify not only when stock is past its shelf life, but also in the event some of your inventory goes missing.
  • Better accuracy: Knowing your stock levels provides more clarity for your entire supply chain.

Types of inventory counts

As we mentioned above, the type of method you choose to count your inventory can depend on a number of factors. Some common ways to count inventory include:

Periodic inventory

A method used when companies are starting out with inventory control, periodic inventory means to count the entire stock weekly or monthly. While you’ll have an exact count at the end of the day, those quantities won’t be reliable for long.

Inventory cycle counting

Employed once periodic counts become too frequent, inventory cycle counting involves counting a portion of your inventory each day so over the course of a month the entirety of your stock is counted. You can use these counts to pinpoint discrepancies and identify trends in damage, shrink and spoilage.

ABC counting

This method uses cycle counting but adds more data into the mix. This involves ranking your products by priority based on their price and popularity. The top 20 percent of items that sell the fastest and are the most valuable are “A” items. The bottom 20 percent are “C” items, and everything in between are “B” items. “A” items are counted most frequently, such as daily or weekly, “B” items less often and “C” items are counted the least. This allows you to manage your stock counting calendar more easily while still maintaining a more accurate picture of your inventory levels.

Just-in-time inventory

Considered a method for when a supply chain is in sync, just-in-time inventory (often referred to as JIT inventory) coordinates receiving raw materials from the supplier as a customer purchases it, reducing waste in the form of inventory housing costs. This can be risky, however, because one slip-up within the supply chain can throw off the entire process.

Using technology for counting inventory

Traditional, manual inventory counts are done by hand on paper. However, this process is time-consuming and human error is common. You can use technology to perform stock counts to not only speed up the process, but also to make them more accurate. Some examples of technology used for inventory counting include:

Barcoding/RFID

Using barcodes, RFID or QR codes is one method of tracking your inventory levels and their movements. This automated process includes some manual labor but automates the management side of inventory control. To get started, determine whether your product already uses a format you can leverage, such as UPC codes. Then decide where you need to add barcodes and what kind you want to use.

Lot control

Assigning each item in your inventory a lot ID allows you to identify its batch, making it easy to locate and track items for details such as expiration dates, recalls, country of origin, materials and more. Lot control uses the ID to ensure regulatory requirements – shipping items separately that can’t be combined, identifying hazardous materials, controlling the sale to licensed customers and more.

Enterprise resource planning (ERP) software

Tracking your inventory by using ERP software as your inventory system is leveling up in terms of counting stock. Not only are automated counting tools available, but they are also the standard. ERP tools perform cycle counting regularly and use that data to inform the rest of your inventory process. Additionally, your inventory data is always up to date and available to your entire organization, ensuring everyone across the supply chain is on the same page.

Final thoughts

Perhaps you already perform stock counts but irregularly. Or your business is expanding and your current method for counting stock is no longer sufficient. Whether that means implementing technology or choosing a different method to determine stock levels, performing regular, pre-determined inventory counts is critical to business and revenue growth.

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