During the day-to-day selling, receiving and in some cases, transferring product from one location to another, it’s easy to lose track of something. Try as we might, there will still be errors in the number of items shipped, received or even which item was involved.
To avoid these problems, systematically verify your stock levels aside from an annual physical inventory. It is simply impossible for your buyers to keep the right amount of stock on your shelves if they don’t know how much is on hand.
Few things are more frustrating than having a customer walk out because there was not enough stock on hand to fill his order, even though the computer showed ample quantities available. Frequently the high-volume, low-cost products are those found to be in short supply. Since they are in the “low dollar” category, they are not counted on a schedule as with the more expensive products. We may know there is a problem with some items, but never quite get around to fixing it.
The question is, do we conduct a full-blown cycle count of a particular product group, or just correct the one error that we know of? It may be possible to backtrack and find where you billed a customer for the wrong item. More often, you know that some of your quantities are incorrect, but not why. It’s time for a cycle count.
You should conduct scheduled cycle counts of everything in your store. Although the cost (overtime?) involved in counting PVC, copper or malleable iron fittings is sometimes more than the actual cost of the products which require correcting, it is still worth it. Once a quarter would be good, but not likely to happen. Count each item at least twice a year. Keep in mind that the main thing that will drive off a customer (aside from poor service) is not having what they want, when they want it.
When you decide to count a particular product group, take the time to make sure the “pipeline” is clear. If stock is received during the course of the day, enter it in the computer before counting. Stock that has come into the warehouse but hasn’t been put away or received in the system is not a problem as long as it isn’t counted. If you count this product but don’t enter it in the computer until the next day, you will be worse off than when you started. Remember that once a cycle count is started, the quantities in the computer are frozen. Receiving this product after the count adds that much more stock in the computer, though not the shelves.
The same thing happens if you have shipped something, but not billed it. In most companies, letting something leave the building without being billed pretty much guarantees unemployment. But there are those occasions when an invoice gets overlooked. Be especially careful to make sure all billings are processed or the next day your numbers will be wrong again. By verifying on-hand quantities you ensure that your buyer knows what and when to order. Order points are critical. When a product has an order point of 15 and the computer shows 25 in stock, it isn’t likely to be ordered. If you actually have six on hand, you will run out of stock while still showing inventory on the shelf.
Buy some pizza, pay the overtime and count the small stuff - it’s worth it.
