Stock problems have been around since the beginning of trade. The financial risk of catering high above or well below the demand curve is significant, to say the least.
Just look at 2015 – $1.1 trillion flushed in the retail industry because of stock-related issues. What a waste.
This is why accurate inventory reports can save the day. If you want to make data-driven decisions to prevent financial fallouts, your numbers must reflect reality in the present moment (not yesterday’s figures). Preventing stockouts or overstocking starts with improving how you capture, manage & consolidate your data.
In this post, we’ll illustrate the value of accurate reporting, give you five tips for getting there, and list a few best practice to-do’s when you face a stockout. We’ve added a few helpful resources at the end for further exploration.
To get us started, let’s talk about inaccuracy first.
The Aftermath Of Inaccurate Reporting
Being overstocked or understocked often trails its way back to poor inventory management & insufficient demand planning. Sure, life gets in the way – suppliers fail to meet our expectations, the stock might get stolen or damaged, and economic contractions can affect every link in the supply chain.
However, proactivity is at the heart of progress and improving the way you manage inventory – one step at a time – will save you a lot of money & customer disappointments.
Here’s why you want to manage your stock with close precision…
- Blown Up Carrying Costs – Overstocking due to distorted inventory reports can slow the movement of goods, produce waste, increase storage costs & tie down your capital.
- Process Inefficiency – Overstated orders may increase lead times, while understated orders (and the subsequent rise in delivery frequency) can bump up the time your workers spend on handling.
- Lost Sales – Understocking can lead to frowning customers who look to competitors to purchase from instead.
- Mismanagement – Inventory reports can be used by stakeholders or investors to make critical business decisions, and inaccurate data can harm their strategic effectiveness.
- Legal Consequences – From tax fraud to breaching contracts, inaccurate inventory reports can backfire & decrease your credibility with stakeholders, investors, suppliers AND customers.
Your Customers Appreciate Speed & Accuracy
Many factors feed into a dissatisfied customer, but where does customer satisfaction & inventory management overlap? Speed.
It’s easy to see how some of the above scenarios can lead to a lengthy checkout process, and we all know customers don’t like to wait. Today’s consumer is drowning in choice, and if operational insufficiencies leak through to customer touchpoints – you’ll likely lose them to the next best.
No matter your industry, you’re up against stiff competition. Some customers are more understanding than others, but a dent in your reliability can easily translate to concerns (albeit exaggerated) about other aspects of your business.
It’s best to try and avoid this as much as possible. Preferably you’d have some protocols ready when you face a stockout, for example, but more on that later.
Let’s dive into the tips we’ve compiled to maximise your chances of precise reports.
5 Tips For Accurately Reporting On Stock
1. Pick Your System Wisely
Your system is your operational backbone and should be able to bear the weight of your inventory requirements.
Let’s take a look at three systems typically used to manage inventory & glance over their perks and drawbacks:
Old-fashioned, easy to use, but prone to misplacement. Most businesses use paper in one way or another. Paper is a reasonable fit for sole traders, small firms or companies that have very little inventory to manage in the first place.
The advantage of using paper is that it’s easy to use – enabling workers with basic writing skills & little technical aptitude to record stock count.
The downside? It’s hard to manage. The paper process loses its reliability once you introduce a bit of intricacy & scale. Sustainable sourcing is another caveat to mull over if you’re environmentally conscious.
B. Excel Or Office Sheets
A step up on paper – digital, cloud-capable and highly formattable. A sound (and popular) system to work with. Programs like Excel are usually used in conjunction with paper – a two-step process to documentation.
These programs can handle bulky inventory logs, neatly organised under folders & backed up with little effort.
The main con is the lack of mobile-friendly capturing capacity – thus, a two-step process is needed.
C. Inventory Management Software
The modern way to tackle administrative load. If managing your inventory with paper is slow and messy & you’d like a reliable way to quickly capture data on the job (even without an internet connection) – consider offline-capable software.
Specialised software lets you hone in on specific workflows and can help solve specific operational problems. Sortly, for example, was created to solve the problem of improper stock tracking in small companies. They offer niche features like quantity-based alerts and date-based reminders.
A flexible tool like Appenate is a better fit for medium-large enterprises that need highly-customisable solutions that adapt to ever-expanding form requirements.
The pricing of mobile-friendly tools differ, so do some research and find a tool that fits your needs & budget.
2. Establish Clear Roles & Schedules
Assign Roles & Protocols For Execution
Whether you’re conducting spot counts, cycle counts or an ABC analysis, make sure your workers clearly understand their responsibilities.
Stipulate the process of each count type in a readily accessible document so that your employees can refresh their understanding of the protocol.
It’s also wise to have a whole team of workers trained in stock counts to stand in for one another when needed.
Revisit Your Schedule
Inventory counts can disrupt your operations. For example, complete inventory counts can only be carried out when stock movement is at a complete standstill. So remain flexible and pick a time that makes sense to you.
Keep to your target, however. If pesky report discrepancies have a habit of showing up – bump up your cycle-counting rate or switch to a perpetual-counting system and occasionally perform complete physical counts to complement the process.
3. Organise Your Stock
Managing a warehouse is tricky, and running a disorderly warehouse is a downright nightmare. Easy stock location is critical to the smooth flow of the chain & will significantly aid the counting process.
Imagine the headache of hopping between sheets to log basic inventory details!
Great organisational capacity starts with the design of your warehouse, yet many labelling techniques exist to make your stock more accessible regardless of your store layout.
Here are some popular (and effective) labelling systems:
Sort your inventory according to its value & importance with this three-tier system.
- A – The 20% of your stock that brings in 80% of your profit, in other words – your most important supply.
- B – The 30% of your stock that accounts for 15% of the overall inventory value.
- C – the 70% that adds up to around 5% of the overall inventory value.
This will help you tend to the most crucial managerial activities first while still allocating time for the rest.
This method is beneficial for businesses that handle goods with ‘best before’ dates & products that are susceptible to price fluctuations.
As the name suggests, the first items to arrive are the first ones to go – preventing spoilage & enabling the accurate documentation of COGS (Cost of goods sold), which can reduce your overall tax liability amid price escalations.
Grouping By Item Type
This is relatively intuitive, and most companies utilise this system in one way or another. You pick the characteristics that make the most sense for your organisation and group all your stock into subsets based on these communal traits.
You can group by physical characteristics, function, value and supplier name, to name a few. Keep the movement cycle of your inventory in mind when deciding, and be sure to account for potential spatial issues.
Grouping By Seasonal Demand
Grouping by demand patterns might be a good idea if you closely monitor market trends.
To implement this method, ensure you have enough historical sales data & have done your due diligence to craft visual predictive graphs to easily identify consumer trends.
Relying on common sense is not sufficient. Data-driven decision-making will save you the trouble your intuition can lead you to.
We liked this list of ideas by Christina Dube on organising your warehouse for maximum productivity.
4. Leverage Technology
This is a must-have for any company that handles a lot of inventory. It removes human logging errors almost entirely, and it’s a convenient way to track your inventory (using optical reading technology) as it moves around your warehouse.
You’ll need a barcode generator, printer, scanner and the right software to roll out your speedy new tracking system.
Appenate has a built-in barcode field that allows you to generate, scan & manage items with relative ease. For scanning, you can use your mobile device or connect an external scanner to our platform. We’re fans of Zebra Technologies‘ quality external scanners – check them out.
RFID (Radio-frequency Identification) Tags
These serve a similar purpose as barcodes but use small electronic devices that submit signals to scanners via radio waves. They capture and send information through small antennas, requiring readers compatible with the type of tag used.
They’re different from barcodes in that they can capture information from a few feet away, are more durable & many tags can be scanned at once.
We have a built-in field for NFC (near-field-communication) scanning, essentially serving as an RFID reader that can read and write data to RFID tags.
Tracking is now easier than ever!
AS/RS (Automatic storage & retrieval systems)
At the high-end of warehouse tech, you’ll find… robots. AS/RS use cranes or robotic shuttles to move inventory around in a warehouse, replacing forklift operators & inventory clerks almost entirely.
These robots can work 24/7, make better use of limited storage space by vertically stacking items, and increase the general accuracy of inventory management.
Here’s an impressive example by Bastian.
A good inventory management software will effectively digitise your admin, reduce task-turnover time and provide real-time data on your stock.
Investing in management software is often an excellent place to start for companies seeking a soft landing in the digital world. Opting for flexible and affordable solutions that solve specific admin problems will allow you a viable entry route to experiment without breaking your budget.
TEC did an excellent job introducing the benefits of investing in Inventory Management Software with their youtube video. If you’re interested:)
5. Set Reorder Alerts
Automated alerts are helpful, especially with POS (point-of-sale) or management software. You’ll need to establish the par level for each item type, which is just the minimum quantity you want to keep on hand at all times…And reorder points for each, which will typically fall a bit higher than your par levels to account for lead times.
These alerts will help you prevent stockouts, and you can also use them to trigger recounts to double-check inventory levels.
The Best Way To Handle Unforeseen Stockouts?
Unprecedented stockouts suck because losing a customer is a costly feat. It also stifles confidence levels in your customers and tempts them to look to competitors.
Yet, these happen. All too often. Having a protocol for dealing with different kinds of stockout scenarios will help you regain trust & positive sentiment from your customers.
Here are five things you can do to rebalance the scales:
- Notify your customers ASAP & provide estimated restock dates (go the extra mile and allow backorders.)
- Provide incentives for those willing to wait for restocks.
- Have a list of 3 suppliers for every item type so that you can pivot when your primary supplier runs into issues.
- Maintain an open and close relationship with your suppliers to ensure you’re being prioritised when critical supply updates go out.
- Implement our tips on accurate reporting to ensure a smoother time managing your inventory. 😉
Solutions DO Exist!
If you’re still here – thanks for sticking around! We encourage you to take a moment to consider whether our platform might be a good fit for your operations.
Appenate opens the door to flexible app building without the need to code. You can replace ALL your paper forms with highly configurable digital forms. You’ll cut stock counting time in half with our mobile-friendly QR scanners, have an easier time locating items with location pins & identify bottlenecks faster with real-time stock data.
We’ve pre-built app examples to illustrate our potential, but don’t be fooled… We’re capable of much more. Sign up for a free trial to discover the full extent of our power.
Here are a few relevant app examples (we have more😉) you can install with your trial run for a head start.
If you need a unique solution from the get-go, our world-class support team will happily jump in to help you set things up.
Don’t Stop Exploring Just Yet
I hope we left you inspired and ready to tackle the next step of your improvement strategy.
There’s still much to explore. Many brilliant professionals are writing about this very topic online, and next-gen technology is springing up across the globe, and finding professional consultants has never been easier.
We wish you smooth operations & sizable returns!
As promised, here are a few resources to supplement your deep-dive:
- Seneca Global created a practical guide to physical inventory counting & cycle counting.
- “Maximising Efficiency: Tips to Boost Your Operational Effectiveness” – one of our own😉
- Oracle NetSuite never fails to deliver quality content. In the context of this post, Abby Jenkins’ article is well worth a read – “ Physical Inventory: Steps, Best Practices & Tips”
- “How to Create the Ideal Inventory Software Workflow”, penned by Lisa Schwarz @ Oracle Netsuite
- “3 technologies for effective inventory control and stock management”, by Cohesio Group.
- “14 Inventory Management Trends to Watch Out for” – Toolsense.