Do you know how accurate your inventory count is? If you don’t, you aren’t alone—many companies have difficulty providing a confident answer that question. Or, they can, but they give a number that is actually incorrect. Neither situation is desirable.
At its core, inventory accuracy is a fairly simple metric. It is a reflection of how closely your count matches the actual physical inventory stored in your warehouse. The factors that go into improving and maintaining inventory accuracy, however, are more complex. When your inventory count is inaccurate, it means wasted time, wasted money, delays, and reduced manufacturing efficiency, among other things. So where does one start? This blog will provide some important factors to consider when seeking to improve inventory management and accuracy.
How to Count Your Inventory?
There are a few common approaches to measuring inventory accuracy:
Physical counting – This method requires taking a time-consuming physical count of your entire inventory. Due to the effort this involves, many companies are undertaking full physical inventories less frequently than might be necessary.
Cycle counting – Cycle counting enables a business to count a certain number of items rather than their entire inventory. This count is then used to infer the accuracy of the entire warehouse.
ABC analysis – This method of cycle counting divides your inventory up into categories: A is the most valuable items, followed by B, and so on. It allows you to prioritize your time to the items that are worth the most to your business.
Manual or Automated?
Many businesses face the decision of choosing between a manual and automated inventory system. Automated systems can offer advantages to businesses of all sizes. For larger businesses, automated processes save time and reduce labor costs. For smaller businesses, automated systems can scale to match the growth of the company. In addition to these benefits, automated systems reduce and eliminate human error.
Correcting Errors vs. Preventing Errors
While there are many steps you can, and should, implement to reduce errors in your inventory counts, the most effective way to increase inventory accuracy is to prevent future errors from occurring. Cycle counting and increasing the number of physical inventories taken will help with inventory management, but true process improvement will allow your business to make meaningful, sustainable improvements.
Implementing New Technology
Implementing tools like RFID and barcode technology into your operations can deliver dramatic increases in accuracy. Automated tools like these don’t just increase accuracy, they can also deliver a whole lot more value to a business. For example, incorporating Passive RFID throughout the warehouse can provide you with non-line of site information on where items are at any time, while barcode scanners can make the physical inventory process a lot less time consuming but depend on line of site.
Whatever your company’s inventory methods, there’s always room for improvement. Contact The SMS Group today to find the solutions that can help your business increase inventory accuracy.