Will your business be taking physical inventory soon? Before you do your first physical, there are some things you’ll need to figure out.
First, here’s the research. Inventory discrepancies that most properties experience are from the following:
80% - Internal Process and Paperwork
16% - Associate Theft
3% - Guest/Member Theft
Let’s address the biggest cause of variance, the internal process, starting with your team:
1. Is there a culture of seriousness around physicals? Establish one.
A kickoff meeting with your team will set expectations.
How many times will you take inventory?
3. Pick the least stressful time and set the date
You can change this as needed, so don’t stress. Does this need to be at the end of the month? No! That’s a myth, you can take inventory any time. Set a time-of-day deadline and pick something firm so your team has a clear understanding. “By end of day Tuesday the 4th”, or “By 2pm on Thursday”.
4. What will your countdown process look like?
You’ll need a 7-day checklist leading up to the event. This will include tasks like processing all damaged items, bringing all products back to sales floor, running negative on-hand reports, and organizing store rooms and printing zone sheets. To see Yellow Dog’s full checklist, visit our home page and click on “Inventory Best Practices” for a downloadable list.
5. Determine your physical approach.
What are your zones and assignments? Will you scan each tag individually or scan and enter the quantity? Discuss problem items. How will you handle? Who will handle? Where? Be very specific.
6. What are your thresholds?
This depends on your ownership. When will you recount, and what is the criteria? What is an acceptable shrink due to theft – 3%? 2%? Will you take the time to investigate variances? Which ones?
7. Cycle Counts
Create a schedule of when to cycle count and what to count. Adjust your frequency to the high variances – High=Monthly, Low=Quarterly. Don’t go a long time without resolving variances – the bigger they are, the harder they are to figure out.
What kinds of reports need to be generated after each physical?
If you figure out these 8 things, you’ll be well on your way to a chaos-free physical inventory process. For a more complete list, download our “Physical Inventory Best Practices Guide” available for free on our home page.