Inventory Discrepancies: 8 Mistakes You’re Making
Written by: Alexa Forsyth
December 11 , 2024
Inventory Discrepancies are Costly and Need to be Fixed
Inventory discrepancies occur when the quantity of inventory on hand differs from the quantity recorded in the inventory tracking system (like an ERP and/or WMS). Detrimental profit losses can be incurred when inventory information is inaccurate, and distrust can build when customers do not get their orders fulfilled. A small margin of inventory discrepancy is inevitable, but how it is managed and how quickly it’s spotted can make all the difference in the impact it has. Proper inventory tracking, reconciliation and management are vital to any profitable and successful business. Are you making any of these mistakes? What could be causing your inventory discrepancies?
Mistake #1: Assumptions Made on Receipt
When receiving a shipment to the warehouse, the quantity in the shipment is indicated on the purchase order. When workers receive a pallet or boxes of an item, they can either count each item or assume the supplier has sent the amount stated on the purchase order. If a mistake was made and a different quantity is in the shipment, this can result in an inventory discrepancy.
How to mediate: Workers can count the quantities they are receiving or only assume accurate quantities from tried-and-true trusted suppliers.
Mistake #2: Picking the Wrong Item
If similar-looking items are slotted next to each other, it is easy for pickers to accidentally select the wrong item. This will physically decrease the quantity of one item, but system-wise will decrease a different one. A mistake like this will cause two items to suffer a discrepancy.
How to mediate: Pickers can be required to scan items when picking to ensure the correct one is selected. Additionally, slotting items that do not physically look the same near one another is likely to decrease picking error. For example, with clothing, do not slot a S, M, and L shirt of the same colour next to each other.
Mistake #3: Picking the Wrong Quantity
When large quantities are picked, it easy for a picker to accidentally take the incorrect quantity. With picking quotas to fill, pickers are trying to go fast – if they need to take 25 EA, the chances of quickly grabbing 24 or 26 are high.
How to mediate: Pickers can be required to scan the barcode of each item, instead of keying in a total quantity and counting outside of the system. However, users will sometimes “cheat” this system and scan the same item X times, rather than scanning one item at a time via the system. Another method to ensure the proper quantity was picked is to have a verification later in the warehousing procedure. If the quantities are recounted when packing, this extra check will ensure the proper amount was picked.
Mistake #4: Picking the Wrong Unit
Multiple units of measure will often be stored within the same location. For example, a pallet of pens may have 50 cases, each case has 10 packs, and each pack contains 3 pens. Each one of these units is priced differently, and ensuring the proper unit is picked will avoid any under or over picking.
How to mediate: A WMS can manage different units of measure for the same item, and each unit of issue can have a different barcode. By forcing the user to scan the barcode, the WMS can ensure the user is not over picking (ex: accidentally picking 1 case instead of 1 each) or adapt the quantity required to pick for the unit of issue scanned.
Mistake #5: Out-of-System Movement of Inventory
When users need to go quickly, or something isn’t working right away on the handheld, inventory is sometimes moved outside of the system. These movements wreak havoc in an industry’s inventory management. Once moves begin occurring outside of the system, all visibility and traceability is lost.
How to mediate: Empower users to use the system! By training users extensively on how to move and pick inventory in the system, they’ll be more inclined to use the systems in place as intended. Take the time to ensure users comprehend the strengths and advantages of using your system. One key way we’ve seen this achieved is through gamification.
Mistake #6: Data Entry Error
A misplaced decimal can skew the inventory available to promise. It is imperative to review the units of measure of an item to guarantee it properly reflects the dimensions of item.
How to mediate: When creating items in your ERP, use the vendor specifications for the unit of measurement of the item. Then, once the item is physically received, verify the proper dimensions are in recorded for the item.
Mistake #7: Lack of Auditing
Even if everything is done perfectly, items will get misplaced, or quantities will be inaccurate. It is crucial to perform regular cycle counts of the inventory in the warehouse. This can help correct and flag discrepancies in the system before the gap grows too large.
How to mediate: Set aside time at specific frequency to perform inventory counts across the warehouse. If your warehouse experiences a downtime- schedule a count for then! Otherwise, section off zones or aisles to be counted in your regular operations and day to day. Different frequencies of count can also be established for different classes of items. For example, monthly counts could be scheduled for class A, fast-moving items, and quarterly counts for larger, slower-moving items.
Mistake #8: Lack of Information Transmitted Between Systems
While the quantity of inventory in stock is highly important, it is not the only determinant of inventory transparency between systems. Unfortunately, shrinkage, theft, damage, or spoilage is inevitable in a warehouse. If an item expires or if it is damaged, this condition change needs to be communicated to the ERP to ensure only the sellable quantity of inventory is available.
How to mediate: Perform regular inventory counts to stay up to date with the condition of the inventory in your warehouse. Utilize different condition types and adjustment reasons to add clarity on the state of the inventory. Some warehouse management systems automatically change the condition of item if the inventory is expired or within its expiry date tolerance. By regularly updating inventory conditions between systems, this ensures the correct quantity is displayed and unserviceable items are taken out of circulation.
What to do Now?
Update your processes where you can! Implementing strategic measures, such as regularly performing inventory counts, optimizing item slotting, comprehensive item scanning, and leveraging condition changes, all serve to elevate and improve inventory management. Not only will accurate inventory visibility enhance operations, but it will also allow for more efficient space utilization, faster and more precise picks, and foster improved customer reliability and confidence. By focusing on rectifying a few key factors that lead to inventory discrepancies, your company is sure to reap the rewards of a more streamlined, efficient, and accurate warehousing operation.
Don’t let inventory discrepancies hold you back. LIDD’s expertise ensures your warehouse processes are optimized to ensure accurate and cost-effective inventory management. We’ll help you find the right solutions and implement them effectively, maximizing your return on investment.