How to Improve Inventory Accuracy in a Warehouse

Managing inventory is critical.

Maintaining an accurate inventory is important in replenishing stock and in avoiding the need for liquidation. Selling a product at the most profitable portion of its lifespan increases profitability. Businesses lost $33.5 billion from inventory shrinkage in 2009, according to the National Retail Federation. With tighter profit margins and stiffer competition, you simply can't afford to maintain lax inventory management techniques. There are several things you can do to improve accuracy in your inventory.

Things You'll Need

• RFID devices
• Security cameras
• Handheld inventory scanners

Instructions

1. Purchase handheld inventory scanners and related software. These devices allow you to scan a series of bar codes, then upload them to compare your presumed inventory. The speed and accuracy of these devices allows you to perform spot checks of items instead of waiting until your annual or semiannual inventory.

2. Purchase security cameras for entry points to your warehouse. Utilize a time-release digital video recorder to record all activity for later playback if necessary. Post signs to make customers and staff aware of the cameras.

3. Utilize radio frequency identification (RFID) tags and patches when possible for high-theft items. These small devices trigger an alarm when you attempt to exit without deactivating them. Place RFID scanners where customers and staff exit. Install the RFID tags during the initial counting of an order when it arrives.

4. Verify that all of the items in a master pack, a larger box holding multiple individual inventory items, has the same number inside the box as it says on the outside of the box, then reseal it until it needs to be open to pull stock. This should be done when it is originally received. Once it is opened and items removed, mark the box as being partial and not complete.

5. Monitor your staff, especially as merchandise is received. A large percentage of inventory theft comes from internal sources.

6. Separate customer purchases, damaged or defective items and non-inventory items in areas that are clearly marked. These can accidentally be counted as stock during inventory if they are too close or not marked correctly.

7. Require two signatures on any loss or shrinkage report. This applies to receiving new stock and performing annual inventory. This accountability will reduce the likelihood of human error.

8. Monitor inventory spreadsheets often, looking for zero and negative quantities. These may be an indicator of a misnumbered item.

9. Perform yearly inventory after-hours. Presort all stock into its correct place be sure everything has an inventory tag or bar code. Complete the inventory before reopening if possible.

Tips & Warnings

• Double-check empty boxes before throwing them away.

• Avoid clutter and trash in your warehouse.

• Stock individual items in only one place in your warehouse.

• Create a discipline policy for warehouse staff to address violations of inventory control measures. Document violations and discipline as necessary.

References

• University of Nevada-Reno: Inventory Reduction Report; August 2001
• Pepperdine University: Managing the Critical Role of the Warehouse Supervisor
• Directory M: Inventory Management
• Inventory Ops: Guide to Inventory Accuracy; Dave Piasecki
• Top 7 Business: Top 7 Tips To Improve Your Inventory Accuracy; Phyllis Davis-Minik
• Insider Reports: 10 Steps To Improve Your Inventory Accuracy; Phyllis Davis-Mink

Resources

• University of Arkansas: Does RFID Improve Inventory Accuracy? A Preliminary Analysis
• National Retail Federation: Inventory Shrinkage
• Water Garden News: Inventory Shrinkage Decreased in 2009, Survey Says
• RFID.org: Radio Frequency Identification