It might sound so common-sense and basic that you feel it’s unnecessary to even stop and properly think about it, but it’s always important to take stock - literally - of your inventory and your approach to how you manage it. ‘Supply and demand’ - a phrase as old as time itself. You don’t need that one explained to you, but you do need to reliably and cost-effectively control your inventory, a critical measure for businesses of every size and strength.
Failure to correctly get a handle on this crucial element could directly result in loss of revenue, missed sales opportunities, untraceable vanished goods, dissatisfied customers, a reputation for unreliability, and a potentially negative atmosphere overall.
Inventory management and clever planning are a vital component of your day-to-day operations, and you’ll want to be mindful of avoiding future pitfalls such as supply chain breakdowns. So, let’s set about implementing the most efficient and least stressful ways to manage your stock.
What is Inventory Accuracy?
Inventory Accuracy is a pretty straightforward concept. Essentially, it is a metric used by businesses in order to keep track of a physical inventory - be it contained within a store, warehouse, or other such storage facility - by measuring how closely the physical stock lines up with digital records - or analogue, should you still use that notably more time-consuming method.
For example, if you’re seeing a readout of 80% accuracy, that means you have 80% of the products listed in your inventory system physically available for purchase. The remaining 20% you thought you had… you actually don’t have. Not ideal. Naturally, you want your business to have the highest inventory accuracy possible, for reliability as much as for peace of mind.
How to Calculate Inventory Accuracy?
In order to correctly calculate inventory accuracy, you’ll need to compare and contrast between your physical stock - the exact number of items you tangibly have in front of you - and your electronic records - via whichever system you have used to record this data.
There is a quick formula for doing so - number of items physically counted / number of items on record x 100.
Consult your electronic records to identify how many items are in stock
Manually count the total number of items in your physical inventory
Double and/or triple-check these counts until you are satisfied
If necessary, consider asking another member of staff to assist and ensure accuracy
Divide the number of physical items by the number of items on record
Multiply your answer by 100 to get the inventory accuracy percentage
The Benefits of Accurate Inventory Tracking
Smarter / Faster Decisions to Meet Demands
At the most basic level, you need to ensure you have the correct amount of inventory available to fulfil your sales obligations. It’s hardly rocket science, but it is extremely important! As with any finely-tuned process you know you can rely on, inventory accuracy is all about removing barriers and stresses that can harm your day-to-day.
Implementing an effective management method leads to precise data, which leads to confident, intelligent, and quick decision-making and wide-scale production planning.
Customer Appreciation
The customer is always right - and they’re often in a hurry and won’t have an issue looking towards a competitor if you fail to guarantee what they’re looking for. Keeping a well-stocked and frequently replenished inventory is key to ensuring customer satisfaction. If your business is primarily or exclusively online, accurate inventory tracking should reflect this, only listing currently available items at time of browsing and/or purchase.
Your customer is your priority, as is ensuring their experience - from order to delivery - is a safe, secure, and satisfactory one. They expect you to have a firm grip on your stock levels, so don’t leave anything to chance on this front.
Time / Budget Management
Quickfire and 100% factual access to your entire stock list cuts out needless time-wasting, and it can also help you cut costs.
A keen understanding of what you need and do not need gives you the chance to work out a budget for priority future purchases, as well as identifying best-selling items, allowing you to focus your attention - and budget - accordingly.
Cost / Space Reduction
Accuracy ensures you will avoid overstocking goods that are slower to move, so you can forego unnecessary spending in that department. You’ll also cut down on insurance and storage-related costs, as well as free up space for other, better-selling products.
Identifying Missing / Stolen Stock
As with everything in life, things can go wrong from time to time. In the case of running a multi-layered enterprise - big or small - you have to anticipate the occasional problem. Should any of your stock suddenly go missing - be it accidental, oversight, or an incident of theft - an up-to-date and thorough inventory list will help you quickly identify the issue, and establish a close timeline of when the item was lost or stolen.
Improved Relationships
It’s not just customers you need to keep happy. Your relationship with suppliers is paramount. Clarity and communication are key. Inaccuracies and confusing / rushed orders are not. Eliminate the margin for error with a clear understanding of what you have, and what you need.
Environmental Impact
Less overstocking means you’re likely to generate less overall waste, meaning a positive eco-friendly outcome and a way of working towards an all-round greener business.
The Risks of Inventory Inaccuracy for Your Business
By now you should be appreciating the importance of a strong inventory accuracy system. Still, it’s worth reflecting on the dreaded consequences of inaccurate inventory management, which you’ll want to do your utmost to avoid:
Dissatisfied Customers
An inevitable repercussion for the failure to meet the basic - but essential - demands of the people putting money in your pocket. Lack of stock = unhappy customers who will shop somewhere else. But you don’t need a maths equation to figure this one out, right?
Negative Reputation
Word-of-mouth is often referred to as the best form of marketing and advertising there is, and it has taken on significant heft in recent years with the omnipresence of social media.
A positive experience for your customer brings with it the chance of them warmly recommending your business to those within the sound of their voice. A negative encounter - perhaps the result of broken promises due to poor inventory management - is likely to spread far and wide, especially if it hits digital platforms.
Financial Losses
A negative reputation amongst customers - pre-existing and potential - is going to impact your bottom line, as is a scattershot mindset when it comes to keeping track of your inventory. Get your house in order and sidestep any knock-on financial damage that may arise otherwise.
Time-Wasting
If you’re using an inconsistent method or simply not applying the proper level of care regarding your inventory, you’re just needlessly throwing your time away, running the risk of having to repeat the task several times more. This should be a core foundational exercise, one that you don’t rush through, but do save time on in the long run.
Poor Productivity / Atmosphere
Wasting all that time isn’t going to make you or your employees any happier, leading to a noticeable tension in the air. You also risk the knock-on effect of other areas suffering from a lack of productivity, perhaps leading to mistakes causing major issues down the line.
Common Inventory Management Challenges
As noted, things go wrong in life, so don’t panic if and when you run into some difficulty when it comes to keeping account of your goods. A tight inventory management system will help you combat some typical obstacles faced by businesses, such as:
Manual Error
Technology continues to advance at a rapid rate, but at the end of the day we’re only human. Mistakes happen, be it when we’re under pressure or just plain old random human error. Expect the unexpected in this case, shake it off quickly, turn your focus to solving the issue, and learn from the mistake so that it’s less likely to happen again.
Demand Forecast
A certain product may announce itself as a constant seller and thus a no-brainer when it comes to frequent and fluid re-stocking. Not everything is as easy to predict, however, and you’ll need to be careful when forecasting the demands of your customers.
Be wary of both overstocking and understocking, with too much of one thing and not enough of another resulting in dual problems - wasting your time, space, and money in one instance, and failing to keep up with the needs of consumers in the other, losing out on their custom as a consequence.
Demand Fluctuation
In the vein of your overall demand forecast, always keep an eye on industry patterns and abrupt shifts, particularly where the attitudes and actions of consumers are concerned. Increases and decreases in spending activity make for great case studies, and could make a crucial difference in both the size of your stockroom and your budget.
Product Expiration
For one reason or another, your stock may become less valuable or even completely obsolete after a certain period of time has elapsed. Perishable goods generally have a shorter shelf life than most, while an endless conveyor belt of technological upgrades guarantees that the latest new and shiny must-have will only dazzle for so long. Choose wisely with risk of expiry.
Inconsistent Methods
If you’ve struck upon an inventory accuracy system that works, don’t change it up for the sake of it. If your method is resulting in inaccuracy and inconsistencies, devise a new approach. Quickly.
Best Practices for Accurate Inventory Tracking
Right then. Let’s put this thing into action.
Staff Training
Everyone needs to be on the same page here. Try and arrange a group training session if you have numerous employees, or one-on-ones if time and circumstances allow. Ideally, you will physically take them through it in a ‘learn by doing’ scenario, leaving no room for inconsistencies or confusion.
Processes Standardisation
In addition to making sure that workers are singing from the same sacred hymn sheet, apply the same discipline to your stock. Streamline and standardise your warehouse / stockroom / storage facility with clearly identifiable areas, either using distinctive markers for unique products and sections, or same-size, space-saving containers.
Regular Count Cycle
Inventory accuracy depends on your commitment to it. An irregular frequency or a generally apathetic approach is asking for trouble. Depending on the size of your business and the amount / consistency of products sold, you may be required to take weekly or even daily inventory. A monthly interval may suffice, but don’t treat it as a forgettable chore.
Embrace Technology
Implementing a dedicated warehouse management system in the form of a reliable software program should save some time and hassle, as should a clearly outlined inventory spreadsheet.
Assign barcodes to your items and check them off with a scanner during your count, cutting out the old pen-and–paper method. Unless, of course, an old-school method works for you!
Self-Assess
Review your approach after a period of time. See what’s working and what isn’t. If the system isn’t to your liking or you’re still seeing inaccuracies, something is broken. Find it and fix it.
Conclusion
Inventory accuracy and management is a fundamental tenet of any successful business.
What happens behind closed doors may not be a concern for your customer, but their experience will be greatly affected by your decision-making and your processes. You have something to offer the world, so why hinder yourself by not properly caring for it?
A successfully-implemented inventory accuracy system elevates customer satisfaction and loyalty, promotes a positive business reputation, saves you time, energy, and money, underlines safety and security, improves productivity and decision-making, and generally makes life easier.
Remember - there’s always room for improvement, so experiment with your approach until you establish an inventory management process that works for you and your company.
Need extra help? DHL Express offers tracking and monitoring functions, shipment visibility, and management features that give you extra control over your inventory.
If you wish to avail of our shipment tracking tools or boost your inventory management, consider opening a business account with DHL Express Ireland today.
For more details click our "Apply for a Business Account" button.
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