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3 min read

Ease the Pain of the Physical Count Process with These 6 Tips

January 16, 2021 9:15:00 AM CST

By Abby Jenkins | Product Marketing Manager for Inventory & Order Management, Supply Chain & WMS

With the end of year upon us, retailers, manufacturers and wholesale distributors are gearing up to conduct annual physical inventory counts. 

Do you dread conducting physical inventory counts? You’re not alone. According to a recent survey during a NetSuite webinar, 70% of respondents indicated that conducting a physical inventory count is a painful process, and 15% don’t conduct one at all. Painful or not, they are a necessity for almost any product company and are critical to ensuring accurate inventory records and financial statements.

A physical inventory count is the process of a business actually counting its entire inventory, comparing the results to the inventory record and investigating and reconciling any discrepancies. Even if you have an inventory management system in place for tracking inventory, financial accounting rules or tax regulations often mandate a physical count to ensure inventory is accurately valued and is an important means of checks and balances to ensure your records are accurate and up to date. 

Conducting a physical inventory count benefits businesses by doing more than just ensuring compliance. It helps increase profitability by:

  •  Controlling shrinkage. The most common forms of shrinkage are loss, damage and theft. Physical inventory counts identify discrepancies in the inventory record and the items on the shelf.
  •  Ensuring customer satisfaction. Knowing what you have in stock, and where it is, is essential for delivering on customer expectations. If inventory records are inaccurate you may be unable to fulfill customer orders or risk customers going to a competitor due to stockouts, which means less money in your pocket.
  •  Supporting data-driven planning. Looking ahead, physical inventory counts can help inform decisions around suppliers, forecasts and demand.
  • Physical counts are often conducted at the end of the fiscal year to ensure inventory is accurately recorded on the balance sheet. January also brings low stock numbers and slower traffic after the rush of the holidays and can generally makes less of an impact on daily business operations.

While conducting a physical inventory count might not be your favorite task, it doesn’t need to be painful. Here are six tips to help you plan for a successful, and painless, physical count this year.

  1. Timing - pick a time that is outside of normal business hours, or at the very least a time that is generally not busy. This will ensure you have the necessary time to conduct the count and rectify any discrepancies before starting normal business processes again.
  2. Notify teams – because you won’t be able to receive or fulfill orders during the physical count process, notify teams when the physical count will take place as early as possible so that they can plan accordingly — fulfilling orders in advance, notifying suppliers and alerting customers of potential fulfillment delays.
  3. Tidy up – take some time to clean and organize the warehouse or retail location. Ensuring inventory is in its proper location will make the counting process easier and ensure all inventory is accurately accounted for. 
  4. Lay it out – creating a detailed plan of what to count and when as well as where it is located within the warehouse will make the counting process less chaotic. Using a map of your warehouse is a great place to start to identify the most logical path for counters to take. 
  5. Be specific - including detailed information in the count plans about where products are located, ideally down to zone, aisle, shelf and bin numbers, will speed the count process and eliminate counters wandering the warehouse trying to locate products.
  6. Invest in technology – mobile devices with scanners allow counters to scan bins and the items within them, generating more accurate counts than manually recording them. Using a scanner also allows for tracking by lots and serial numbers.

If you don’t already, consider investing in an inventory and warehouse management system. Inventory and warehouse management systems make physical counts faster, easier and less frequent. Because inventory records are more accurate to begin with the physical count is less painful as there are less discrepancies to resolve. Additionally, implementing regular cycle counting ensures inventory is counted on a regular basis so discrepancies that do occur are easier to resolve and less impactful. With these systems in place the physical count becomes more of a “checks and balances” versus simply the means of obtaining the inventory information.

Happy counting.