Finding the best process to identify, research and rectify inventory inconsistencies can get organizationally frustrating. One of the main reasons a Warehouse Management System (WMS) is implemented is to aid in such processes by knowing the exact location of inventory. Some might think not finding the inventory would simply mean procedure of writing that inventory off the books ensues. However, a lot more goes into this and it includes accountants trying to deal with discrepancies in the record books along with warehouse managers having to make certain they fulfill orders in a cost-effective way. Inconsistencies between the physical and systemic inventory levels make this task a very difficult one to carry out. This problem can be avoided by following these six steps regarding coping with lost warehouse inventory.
Determine The Rules Based On Your Business Need
Annual physical count has become a method rarely practiced in companies today. The reason for this stems from following strict rules usually set by accounting auditors to ensure satisfactory inventory accuracy. These rules make use of inventory velocity to prescribe a frequency with which items must be counted. It’s very important for warehouse managers to know the rules so that their system can be configured according to what the business needs.
Automate Inventory Control To Reduce Errors
The simplest way to control inventory and reduce lost warehouse inventory is implementing automated inventory control processes. Frequently automated processes include creating cycle count tasks based on a time interval; creating cycle count tasks based on triggers such as shorting a pick; creating a follow-up counting task when a quantity or value threshold has been exceeded; and automatically booking certain acceptable variances. Automation allows users the ability to act promptly and move on to other value-added tasks instead of needing approval before acting.
Book Inventory Changes Immediately
Variances below an acceptable threshold need to be “booked” in the WMS immediately and this then means that the variance is communicated to the financial system. These rules may differ depending on the quantity and value of the variance, which is different for every business. The operation suffers a negative impact when booking is delayed due to research still needing to be completed. Postponing the booking of variances intentionally feeds your WMS bad data and systems usually do not respond well to poor data. For example, when a forward pick location has less physical than systemic inventory, the WMS may not trigger a replenishment that is required to fulfill orders, resulting in shorted picks. On the other hand, if a location has more physical inventory than systemic inventory, the next replenishment task could mean the location exceeds its capacity, therefore spilling inventory into nearby locations or onto the floor, causing safety and accuracy concerns.
Stop Hiding Inventory Pricing From Employees
Although item pricing information may not be important for most WMS functions, it still plays quite a major role when it comes to inventory control. A lot of companies keep all pricing information outside of the WMS with the aim of reducing theft or exposing what may be revealed as competitive pricing information. Instead of storing item cost – at times seen as competitive information – companies opt to store the suggested retail price at the item level and make use of such data to drive inventory control processes. It’s also a good idea to grant decision makers such as floor or shift managers access to this sort of information.
Integrate Systems With Business Intelligence To Compare Database Information
Another option to use to complete the write-off process if the pricing information you need is not available is integration of your report with information obtained from other systems. While this is better than not having pricing information at all, it will influence process automation by reducing its level.
Set Realistic Inventory Thresholds
Inventory thresholds include an allowed variance amount for inventory discrepancies and common examples of these are quantities of units and a percentage of units. Having realistic inventory thresholds gives off an objective view of inventory accuracy and assists in the write-off process. Have a comparison between what your WMS will support and what has been approved by your auditors. Explain to the auditors what can be done to see if it is acceptable before making any sort of changes to your WMS, aiming to support requirements.
While still on the topic of inventory, find out How To Master The Process Of Physical Inventory Counts!
Source: veridian solutions