10 TIPS FOR PERFECT INVENTORY ACCURACY

(NEARLY!)

Even though we have made enormous advances in

technology and business processes, many organizations and
manufacturers still cannot perform basic warehouse
operations without going into reactive mode. This is mainly
due to a lack of proper or basic inventory record maintenance
and accuracy.

Some organizations don’t measure inventory in an accurate

manner, or they don’t even have such measurements in place.
Organizations need to understand that there are multiple
benefits associated with having proper inventory management
processes in place—to provide not only excellent customer
service, but also to help determine future purchases and what
needs to be prioritized in the manufacturing plant; reduce
operating costs; and provide accurate data for financial
records.

Inventory accuracy is one of the major performance factors in

any warehouse or distribution center. To have the appropriate
amount of inventory (i.e. not carrying too much at a time) is a
major success factor for an organization.
Inventory can only be maintained effectively with the right
processes and with proper material handling procedures in
place. Most inventory control problems arise from poor
inventory control measures and lack of proper processes to
report transactions happening in real time within the
warehouse. If an inventory issue crops up, the warehouse acts
in a reactive manner rather than trying to fix the underlying
issue. The best way is to have a process in place that nips
these issues in the bud before problems occur. Most
warehouse management system (WMS) solution providers
have specific functionality for managing inventory as well as
maintaining accuracy across the warehouse or distribution
center. The objective of the warehouse is to have the minimum
amount of inventory on the shelves to fulfill customer demand
quickly and efficiently.

Warehouses that are proficient in handling inventory and can

accurately maintain inventory records outperform their
competition through better order and demand management,
less labor effort, on-time delivery, maximized space and
equipment usage, and a reduced overall carbon footprint. To
achieve these goals, it’s important that warehouse or
distribution centers implement processes to handle inventory
and bring inventory accuracy above 99 percent.

To achieve this objective, here are few suggestions for

organizations that either have a warehouse management
system or that are planning to get one.
 1. Inventory organization. Make sure your warehouse is
organized in an efficient manner so you can identify and
receive material inbound to the warehouse, as well as move
inventory on customer orders (sales orders) without losing
track of what got moved out of the warehouse. This means
that the supplier shipping the product to the warehouse must
label it correctly and place the information on the packaging in
a manner which is easily identifiable by the warehouse
associates so they can receive the inventory correctly. The
details on the packaging have to be synchronized with the
systems within the warehouse or distribution center. Each item
in the warehouse needs to be identified and marked with
details about the type of package, as well as any special needs
(i.e., expiration dates, hazardous material, packaging
requirements, etc.)

2. Process setup for use of inventory. Define all the

processes within the warehouse for efficient inventory
movement and accurate data recording. Start with a
sequential location method within the warehouse that will help
the associate to quickly receive the product. Location
sequencing is fundamental for efficient put away and picking
of the material. Within the warehouse you need to make sure
zones, fixed locations, and random locations are all setup and
these processes are documented clearly in the procedures
outline. This helps ensure warehouse personnel use them for
their own benefit as well as making sure it maintains the
overall inventory management process.
 3. Documentation of processes. Make sure each process is
clearly documented as to how each procedure involved in
moving inventory will relate to inventory accuracy. All process
documentation should include procedures for physical
interaction, material handling safety guidelines, and quality of
reporting. Each task will be detailed in the documentation for
clarity, so no confusion arises. Select a few individuals within
warehouse operations to go over the documentation before its
release to all employees, to make sure all process tasks or
steps are documented and that no pieces of the puzzle are
missing. Once all the reviewers agree, then the documentation
can be released to all employees.

4. Change management. Just documenting processes will not

help achieve inventory accuracy. These documents need to be
reviewed with employees while conducting hands-on training
and in-class training. It is necessary that all employees get
familiar with all the procedures to effectively perform the task.
If employees want to change the process documented, try
changing after few months; it’s best to try something first
before you start fixing it again. Revisions to the process can
occur later on to improve productivity and better handle of
inventory. Nothing is carved in stone.

5. Make sure employees understand. The best way to make

sure everyone understands the process is to test them on the
job as the task is done first-hand. This way, if an employee
misses a step, with the procedural guidelines you can enforce
the matter right away (which brings us to the next point).
 6. Compliance with procedures. Start auditing the process, to
make sure each procedure documented is followed through. If
non-compliance issues arise, make sure to bring them forward
right away with the corrective action in place. If anyone
deviates from the documented process (perhaps because the
deviation seems like the quickest way to do the task), it has to
be clearly communicated that no process deviation is
acceptable and that the only way to perform the task is
according to the documented process.

7. Set standards. For each task setup standard, start with a

lower standard setting a lower standard will build up the
confidence of the employees performing the task. Tasks can be
grouped as picking, put away, receiving, etc., to measure if
everyone can achieve the targeted standards. Keep reviewing
and revising the standards to make them work toward your
organization’s achievement of inventory metrics.

8. Continuous cycle counting. Even though we have

processes in place now to handle inventory much better, this
does not eliminate cycle counting. To make sure we are
achieving accuracy, the cycle counting process helps us
validate that the processes put in place are working and
identifies which areas are still in need of reevaluation.

9. Process review. Have another look at the processes

documented, and review if you think changes are for the
better and can bring more efficiency into the process. Take
into account any suggestions made by the employees who
perform the task, as well consider anything new that is
required to achieve inventory accuracy objectives. Since an
organization’s business needs change over time, a periodic
review of processes help ensure that nothing is missed. Never
change for sake of change; rather, change should always be
done to bring better, more efficient or more productive
elements.
 10. Technology. Now the question comes: how does
technology play a role in overall inventory accuracy?
Regardless of which inventory system your organization has in
place, the underlying factor is how it has been used to manage
and monitor inventory. Business people tend to blame the
system for the mistakes they have done. If the data entered
into the system is garbage, then the results produced by the
system will be garbage as well. The data source has to be good
to achieve favorable results. To implement any new system is
to map the business requirements to the functional
requirement of system—this way, the organization will be able
to use the system to full capacity. Each software vendor can
provide an organization with millions of functions and
features, but these functions and features will be no use if
they cannot be used to maximum benefit. It is also crucial that
the business processes dedicate the system capabilities, and
not the other way around. There are other technologies like
radio frequency identification (RFID) and bar codes that can
automate warehouse processes, which will help in improving
inventory accuracy, and eliminate data entry errors.

Nobody said achieving the goal of 99.9 percent inventory

accuracy would be simple. Success is driven by the people
within the organization. To achieve any objective, the top
management and the individuals responsible for performing
the task need to take initiative to achieve such an objective.
For breaking an old habit takes time and persistence, and the
same applies here: maintaining inventory accuracy needs to be
more than a process—it needs to become an organization’s
habit.

I would like to know from our readers if you have any inventory
accuracy techniques that can help other organizations achieve
the goal of being 99.9 percent accurate. Please leave your
comments !