Inventory accuracy isn’t an inventory problem
Where did it go wrong?
Poor inventory accuracy is easy to diagnose
The system says you have 20 in stock, but you can only find 17 on the shelf. Clearly something has gone wrong. What’s much harder is working out exactly where it went wrong.
Inventory inaccuracies build up through inventory management processes right across the business: receiving, put-away, transfers, picking, replenishment, despatch and returns. An item moves physically, but the system doesn’t move with it. Simple things like a missed manual entry, a transfer recorded late (or not at all), the wrong product picked for an order, or something is put back in a different location.
One small discrepancy becomes another, and the system quickly has a very inaccurate view of what you have and where it is. That’s why improving inventory accuracy starts with improving visibility into what’s happening across the operation in between infrequent and time-consuming manual stocktakes.
Why is inventory accuracy important?
Inventory data is used across the business and affects much more than recording what is counted during stocktakes:
- It influences purchasing and replenishment decisions
- It determines if sales teams and e-commerce platforms can confidently meet customer demand
- It affects fulfilment, forecasting and working capital
- It can be the difference between a good and bad customer experience
When the system record and physical reality begin drifting apart, every process using that information becomes less reliable. The challenge is that many businesses only discover how far they’ve drifted during a stocktake, by which time the problems have amplified and become costly in various ways including wasted effort, financial losses and poor customer outcomes.
Compounding this is the natural reluctance to conduct more regular stocktakes. Manual stocktakes are disruptive events, requiring significant labour, interruption of normal operations (or unwanted after hours or weekend work for staff) and the process can take many hours and even days to be completed.
And after all that, they are often incorrect due to counting errors or missing inventory, and the reconciliation efforts can herald a whole new batch of time-consuming work. Doing this every week is impossible. So stocktakes are done infrequently (and reluctantly).
The longer the gap between counts, the more inaccuracies that will inevitably accumulate.
What causes inventory inaccuracies?
There typically isn’t one culprit. It’s usually a combination of small things that are easy to not notice until they become too big to ignore. Inventory accuracy is affected by incorrect receiving, misplaced stock, order picking errors, unrecorded transfers, returns, manual data entry and delays recording stock movement in inventory systems.
The common thread can be summed up as follows: It’s the gap between the physical movement of inventory and the information being recorded about it.
Efforts to improve inventory visibility are valuable because they actively close that gap. Rather than relying on periodic stock counts to tell you what happened since the last stocktake, inventory can be identified as it moves through the operation (and out the door). Importantly, the inventory management system is updated in real-time as these movements occur, so what’s in the system represents what’s on the floor, in the stockroom or in the dock.
Think of it as a series of touchpoints where inventory is counted and recorded from receiving through storage through stocking through transfers through order picking right through to despatch and returns.
It’s not just about counting inventory faster using RFID technology (though it does that), it’s about preventing the inventory record from becoming significantly inaccurate in the first place.
Does RFID eliminate the need to do stocktakes?
No, and we would never say that’s why you need RFID. It does however reduce your reliance on the infrequent, time-consuming, expensive and inaccurate manual stocktake process that you have depended on to realign your physical inventory with what your system says you have.
With better ongoing visibility, stocktakes can be done more quickly and are much easier to reconcile because you are not waiting months to uncover accumulated discrepancies and issues.
Capturing item-level data all the time as stock moves in, around and out of your operation using a combination of handheld, fixed or mounted readers changes the role of stocktake to one of confirmation, not discovery.
Creating trusted inventory data
Once you have accurate inventory data, you will have increased confidence in what you have, where it is and how it is moving through your business. Then you can make more informed decisions around replenishment, fulfilment and forecasting.
If you want more reliable inventory information without waiting for the next manual stocktake weeks or months from now, talk to the inventory tracking experts at Ramp RFID.
Common questions about inventory accuracy
Inventory visibility is the ability to understand what stock you have, where it is and how it is moving around and through your operation. Better visibility aided by RFID technology helps keep physical inventory and inventory management system records aligned and accurate.
Inventory keeps moving and stocktakes are static counts at a moment in time. As stock goes from receiving to stocking to transfers to order picking to fulfilment to despatch to returns, any small discrepancy or error in counting or recording introduces inaccuracy into inventory management systems, and these small errors compound and accumulate over time until the next physical stocktake.
In a word, yes! Tagged items are automatically identified, or ‘read’, as they move through key points in your operation, reducing the reliance on manual counts and data entry. This ensures that inventory records remain accurate even as stock moves.
Not necessarily. But rather than infrequent, manual, time-consuming and disruptive stocktakes, RFID allows you to do more frequent, faster and more accurate stocktakes that are more about confirming what the system is telling you, not discovering gaps between physical inventory and what’s recorded in your inventory management system.
