What are the most important stages of the inventory?
Despite its simplicity, we consider inventory to be one of the most important business processes in any company. Inventory itself is the process of verification of the company’s goods and improvement of the accounting process. The company efficiency to the great extent depends on how this process is organized. If the inventory quality is not high, that just means that one invalid data is replaced by another invalid one. So here is the question, should actually any inventory be performed in such case or not? In our opinion, to get acceptable quality with low labor contribution, it is very important to choose the right inventory methodology. Apart from that, it is very important the inventory process to be organized properly.
The clients of Aericon faced such a problem. During peak hours such as the Super Bowl, Trivia or even Friday night, it was so hard to get a bar stool or table. So, clients moved on to his or her next choice and the bar owners lose them. But the real day in and day out concern for bar owners is to make sure the bar is bringing in customers whenever it’s open.
In this article we will try to describe the main methodologies of data gathering and analyzing, which will primarily be helpful for commercial enterprisers during goods inventory. Not only will it help to determine the order of the required actions but will also help to identify the main criteria for choosing the appropriate tool to automate these processes. It is more than obvious that it is very troublesome for a company to have incorrect data about its goods. It leads to abuse from staff, stealing, mess in the accounting system, non effective using of resources and so on.
So, where does the mismatch between actual data and accounting data come from? It is all due to the human factor. It is impossible to avoid all these mismatches. Even when the automating level of all the business processes is really high, it is close to impossible to control everything as well as completely exclude the human factor. A worker tends to simplify the work he does, especially if the quality of it cannot be verified properly.
The human factor negatively affects the inventory business process as well. More than that, as this process is labor-consuming it requires a lot of employees whereas that large number of employees should be managed, trained and monitored skillfully. The effort of the whole team can be ruined by negligence of the only one worker. Once the staff realizes that the personal effort of each employee cannot be evaluated, you will not be able to reach qualitative inventory. As a result things get just from bad to worse. That is why it is vitally important to choose the right way during the inventory of business process automating, to make it as controlled as possible and to reduce the influence of human factor.
Due to that, quite simple conclusion can be made – it is not enough to have only a piece of paper and a pencil for the qualitative inventory. It can be done effectively only by using special devices for data gathering (portable data terminals) and specialized software. But it is not enough to have only the equipment and the software. It is important that the inventory process is organized appropriately from the beginning to the end. The secret of success is that devices and software not only provide the set of the required functionality but also correspond to the precise and consistent inventory methodology.
The right inventory should be taken in 4 steps:
● Preparation to inventory
● Properly organized data gathering
● Data analysis
● Bug fixes
Preparation step is very important. Its goal is to define the inventory methodology correctly and to prepare the object to the inventory.
To organize the data verification you need at least to split the inventory objects into independent parts. The more parts you have the easier it will be to search and check the actual availability of the goods. The method of data selecting and gathering is very important. There is a plenty of them and the choice should depend on a variety of factors: accounting specifics, cost and amount of inventory goods, labeling specifics, portioning, amount of available resources, time estimation to complete the inventory etc.
Here are the most popular methodologies used on practice:
● The method of controlling the general amounts of goods according to the place of storage
● The method of double re-counting
● The method of account comparison of the each goods item
The method of controlling the general amounts of goods according to the place of storage is usually used for goods, which have approximately the same price and misgrading is not that important. As a rule, they are clothing stores. For this methodology, data gathering process is divided into two independent processes:
● Counting each trade item on the storage places
● Counting general amount of goods on the storage places. It does not matter which goods are located on the storage place, what really matters is the general amount. This information is only for monitoring the correctness of data gathering
Depending on the accounting specifics, this process can be done by different employees in parallel or gradually by just one. The idea of this type of control is that the amount of all goods items is summed according to the storage places and then is compared to the counting data of the general amount of goods on the storage places. If there is difference between the counting results, this specific place is recalculated again. This procedure is repeated as long as the results are the same.
The method of double re-counting is quite labor-consuming, as in fact they are two separate inventories. Their results are compared and mismatches are re-checked once again. The methodology is applied when it is impossible to get the reliable data from the accounting. But the time, needed to accomplish such inventory can be easily predicted and managed.
The method of account comparison of the each goods item is the most popular one. This process is rather labor-consuming and it is difficult to predict needed time and resources in advance. It is related to the fact that not only the mismatches caused by mistakes during the data gathering have to be re-checked – it is just easily predicted, but also the mismatches caused by mistakes in the accounting system as well as shortage, surplus and misgrading.
This methodology is effective in case the inventory is performed regularly and so the accuracy of accounting data has already been confirmed by the results of the previous inventories. In this case the found mismatches are basically real shortages and surpluses. The more often the inventories take place, the less is the number of mismatches. Therefore, regular inventories, based on account comparison of each goods item methodology are becoming more manageable. At the same time this method is effective to determine the misgrading, which is important for accounting of goods whose loses caused by misgrading can be significant.
In most cases, if a company starts to implement periodic inventories in its practice rather often, it is more effective to perform the first inventory based on the double re-counting methodology and all the following – based on the account comparison of each goods items methodology.
The stage of data analysis and corrections is very important as well. This very stage allows to correct the mistakes made by employees quickly and accurately, define and evaluate the individual input of each employee into the overall work. With the properly organized process, it is the stage where it is possible to reach the needed quality of the inventory. The proper data analysis allows to detect systematic errors while data gathering (for example, related to the wrong measures), as well as errors related to internal misgrading, missed areas etc.
If you ignore at least one of these steps, you will not achieve qualitative inventory. And each of these steps requires involved automation as much as possible to exclude the impact of the human factor. If you make a mistake on a preparation stage, then all the following actions will not be effective. You can try to fix the data gathering mistakes during the analyzing stage. But when the bug fixing process is labor-consuming and non-automated, it nullifies all the previous efforts. Alas.
Unfortunately, the market does not offer any solutions to automate the whole process of inventory (at least for affordable price). What is offered by manufacturers of data gathering terminals and integration systems are simply resources to automate data gathering, nothing more.
Our team set an ambitious goal – to offer the universal solution, which would not only be functional one but also would help the company to follow the inventory methodology, thereby achieving the maximum quality with minimum resources.