In today’s world, agile supply chain networks are vital to survive in the quickly changing economy. The shift from brick and mortar retail to online retail has created many opportunities for 3PL warehouses to grow to support this Omni-Channel shift in fulfillment. Holding inventory in stock is a massive capital investment and expense for any company distributing goods. Therefore, it’s critical for these warehouses to keep an accurate count of the inventory to ensure their clients can maintain steady supply to cover customer demand. Click here for the printed eBook version of this post.
By maintaining proper inventory levels to cover demand, a company can minimize the risk of stock-outs during a busy season, thus improving their Service Level to their customers. However, not having accurate inventory counts could lead to overstocking a warehouse, which can lead to seasonal products sitting on the shelf as dead-stock, resulting in expensive write-off and liquidation costs.
If inventory counts are inaccurate, this can indicate mishandling of product, product damages, or product theft. It is important to keep the system of record as accurate as possible to ensure inventory quantities are correct so businesses can make strategic decisions for product replenishment and reordering purposes.
Every year, every warehouse is tasked with an arduous task of verifying Physical Inventory accuracy. Most clients who we speak with are terrified of those 3 words “Physical Inventory Count”.
However, there are many warehouse operators who embrace the challenge of a physical count because as a 3rd Party Logistics partner, it is their sole responsibility to get this right. By having the ability to effectively count inventory and prove their accuracy, that can make all the difference in the world between keeping clients happy or causing them to shop elsewhere. But where does a 3PL start? There are a variety of ways to perform this service and we will dive into industry best practices to share what other 3PLs have learned.
What is a Physical Inventory Count vs. Cycle Count?
A Physical Inventory Count is the act of physically and visually verifying all physical inventory that is stored within a warehouse for every product. Typically this reconciliation is against a record-keeping system, such as a Warehouse Management System, to compare the system recorded item, quantities and physical locations. Additional details such as Pallet ID tags,
roll #s for paper, expiration dates for food and serial #s for electronics can also be verified in detail.
Rule of thumb: The more detail to confirm, the longer it takes to count.
Cycle Counts are periodic counts for a small subset of goods on a cyclical basis. This helps even out the workload by performing more counts in smaller batches, more frequently. Cycle Counts are a good way to reduce the disruption to other receiving and shipping processes.