As the end of the business or calendar year approaches, the annual inventory project begins to be mentioned. Given the legal obligation, the inventory must be done at least once a year, and it is known that warehouse workers and the management often do not do this project with pleasure.
However, inventory does not have to be chaotic and stressful for workers and the company at all. It is in fact a reflection of the year-round management of the warehouse, goods, inventory, and other assets belonging to the final report, and as such has many benefits to the successful running of the company. To facilitate the process itself, there are specialized software products for process management and automation in the warehouse, but before we touch on all the benefits of such software, we need to define in more detail what exactly is inventory and why it is carried out.
What is inventory?
An inventory is a legally defined process that includes an annual inventory of assets, liabilities, and capital and is conducted to reconcile the book balance with the actual balance of all the company’s assets and liabilities.
The inventory process itself in terms of warehousing operations refers to counting the quantities of stock in the warehouse and checking their condition.
Namely, the purpose of the inventory is to count each item in the warehouse in order to determine the shortage or surplus of stock in relation to the bookkeeping figures, and ultimately to determine the inventory surpluses or shortages.
Time of conduct and types of inventory
Although the law does not clearly define the exact date of the inventory, companies are required to carry out this process no later than the end of the business day when it is necessary to list the assets and reconcile this list with the book balance. In our experience, the annual inventory is in most cases done at the end of the year, before 31st of December of the current year, and before the opening of the new business year, in order to start the new year with a “clean” slate. Inventory is also an obligation when changing the status of a company such as liquidations and bankruptcies, but we will focus here on inventory in regular warehousing and business operations.
When we talk about the types of inventory, most often the already mentioned regular inventory is carried out – at the end of the business year where the subject of the inventory is the entire assets and liabilities of the company. Extraordinary inventory is carried out in case of extraordinary changes, such as sale, bankruptcy, or liquidation of the company, or in case of special requests for the extraordinary inventory of assets within the company. The third type of inventory is kept in companies that have warehouses with turnover and large quantities of goods, and for the purpose of continuous implementation, it was given such a name – continuous inventory or Cycle count.
Challenges of inventory
What is considered a precisely managed warehouse? The goal of any arranged warehouse is to have over 97% accuracy of the goods in stock. In the vast majority of cases, the situation is not like that, and the inventory shows a surplus or deficit of the actual state of the stock. Surpluses or shortages occur mainly due to human error in the warehouse, untimely registration of goods, but also due to the expiration date, accidental destruction of goods, and similar reasons.
If the inventory is carried out manually, with printed inventory lists, it can be a lengthy process that is extremely prone to errors due to the human factor. Companies that rely on employees’ excel spreadsheets, and access inventory without a system must count entire product ranges, with each individual product located on individual transport units. This unnecessarily prolongs the recording process and increases the possibility of error. Also, in such a situation, it is necessary to increase the workforce through additional temporary employment of new employees, which can significantly affect costs. Additionally, without a software system, warehouses do not have strictly defined locations of goods and the search itself is extended.
How to reduce inventory errors using WMS?
There are various tips on how to conduct an inventory in principle and reduce the number of errors and make the whole process easier for all participants. If you’ve already done some annual inventory, you’re probably already familiar with some of them. We will focus here on the benefits you can get using the Warehouse Management System software solution which, due to its automation of warehouse processes, greatly simplifies the process.
If you are wondering how to get started with an inventory and what are the tips for its successful implementation, experts agree that good and quality preparation is crucial to facilitate the process, and it can be done with quality labeling, clear instructions, and inventory lists, all options WMS automatically offers.
The Warehouse Management System and its extended arm in the form of a barcode terminal bring several benefits that will improve warehouse management accuracy and facilitate inventory.
The process of tracking an item begins when it enters the warehouse, during which the employee reads the product with a scanner. This reading is then continuing with any change in the condition such as movement, commissioning, packaging, and all other changes in the status of the goods. These statuses and records of each step of the item in the warehouse are recorded directly in the WMS, so all WMS users in the warehouse know the exact location and condition of the goods at all times. This creates a quality preparation and foundation for the inventory count itself.
Not only is it possible to get an extremely accurate view of inventory through WMS’s way of tracking, but the Warehouse Management System easily integrates with the company’s existing ERP system, so the warehouse status can be seen at all levels of the company.
Faster and more accurate inventory
WMS allows inventory reports to be generated automatically, so it is theoretically possible to have quick inventories on a weekly or even daily basis. When it comes to a comprehensive annual inventory, an advanced warehouse process management software system makes it easier to count items. Employees have precise insight into the condition and location of goods in the warehouse, so the inventory process is accelerated, and re-scanning facilitates and reduces the potential for errors. A
lso, when checking items, employees are guided by manual terminals, according to the logical sequence of locations in the warehouse, and thus errors are minimized. If you have unopened pallets and packaged products, a simple barcode scan can “count” a large number of products extremely quickly.
Continuous automated warehouse management is an excellent basis and preparation for inventory. It is known at which location the goods are located within the warehouse, as well as the other status of the item itself. The WMS system can prepare extremely accurate inventory lists, and due to the nature of continuous monitoring, the inventory process itself will be faster and more accurate.
As a consequence of using WMS, inventory surplus and the deficit will be reduced. They are still possible because people still play a significant role within the company, and mistakes happen. However, with WMS they are minimized. Just as the Warehouse Management System brings greater efficiency and savings in day-to-day operations, it also speeds up the inventory process, which is much more precise.
In case you’d like to find out more, contact us and we’ll provide you with our consultancy.
