Inventory control methods such as physical counts are still needed, even in our technology-driven age. Although you might not use a spreadsheet or a paper-based tick sheet to mark items, you’ll still need to conduct a physical inventory at least once a year, or preferably more. Your accounting department needs an accurate inventory to measure the value of inventory for the balance sheet. Big discrepancies in value can lead to over or under-reporting on the company’s financials.

There are certain tips, techniques, and tricks to taking a physical inventory to get great results. Here, we present the best practices from many manufacturers on making this task a positive inventory management opportunity.

Best Practices for Inventory Management: Physical Counts

1. Try cycle counts: Cycle counting is a popular physical inventory method that takes less time than a full stock count because it takes only a partial count. In cycle counting, you partially count merchandise on a rolling basis so that the sum of each inventory part adds up to the whole. A small section of the warehouse or one SKU category can be counted monthly to keep the entire inventory updated.
2. Use POS systems and inventory management software: Inventory management software, barcode scanners, and POS systems should be used as part of physical counts to maintain the accuracy of the count. Distribution warehouses with good software can take physical inventory faster than one without it thanks to many time-saving features.
3. Incorporate mobile scanner apps: Mobile scanner apps are a breeze to use. They transform your smartphone or tablet into a scanner. You’ve probably used QR codes on a mobile device. Even some diet tracking software on a mobile phone allows you to scan barcodes to assess calories. The same simple scanning technology can be applied to your business inventory, too! Cloud-based inventory management systems using mobile barcode scanners enable everyone to participate in physical inventory counts, making them faster to complete.
4. RFID it! RFID stands for radio frequency identification device, and it’s an inventory management and control technology used throughout many industries. Chips embedded into packaging help you track its location. It’s used frequently as a loss prevention technique but it can also help you with your physical inventory, too.
5. Schedule with plenty of time: Schedule full inventory counts with plenty of time to complete the task. Try to schedule such counts during down times, or at least slow times, so that you aren’t constantly struggling to reconcile outbound orders with inventory.
6. Close warehouse sections under inventory: Label shelves, pallets and bins, and "close" each one for inventory until the count is taken. This way you won’t have to worry about someone grabbing an item from a shelf you’ve just counted!
7. Train your staff: Choose the people who will participate in a physical inventory count based on who understands your inventory and pays attention to details. Next, walk them through the warehouse before inventory begins so they know where everything is located and where any necessary tools, supplies, or other items are in the warehouse. Provide training on how to use handheld or smartphone scanners, and identify a troubleshooter so that if an item isn’t in inventory or they don’t know how to account for it you have a designated person to handle the task. Lastly, follow up periodically during the inventory to make sure there are no additional questions. And thank everyone for helping with physical inventory—gratitude matters!

After the Dust Settles

After your physical inventory is complete, you’re set ... but for how long? Each business must decide for itself how often to conduct a physical inventory. Many retailers do so twice a year, but others find that an annual or every-other or cycle count method works for them.

During the "off season", check your inventory management reports in your ERP program to see how inventory is tracking. Consider spot counts or cycle counts as a supplement to a full physical count if your inventory rotates frequently. Of course, any perishable items must be checked more frequently to ensure that anything nearing its expiration date can be handled properly.

Physical inventory counts are part of inventory management and control that are still necessary for many businesses. Make yours run smoothly by adopting these best practices.

Positive Vision

PositiveVision provides consulting and services to manufacturing, warehousing, and distribution companies. SYSPRO automates many businesses processes and can help you improve communications with customers, among other benefits. Sage ERP 300 also offers a powerful package with great add-on modules to help you create the right ERP for your needs. Learn more on our website or contact us today.