Reach Inventory Nirvana

Advice from true warehouse experts

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Contrast this with the far less time-consuming process of doing regular cycle counts, which involve counting just a small portion of the total inventory – typically at the end of every work day. The goal of cycle counting is to methodically work through the entire warehouse inventory on a continuous and far more manageable basis. By verifying inventory quantity by bins regularly, misplaced items can be found and quickly returned to their correct locations, and errors can be caught sooner. This makes it much easier to correct physical inventory quantities based on specific location, on an ongoing basis. Cycle counts bring a warehouse many additional benefits, not least of which is the ability to reduce unnecessary inventory levels, often called fear stock. This practice also helps to usher in efficiency gains at the warehouse, ultimately resulting in increased sales thanks to improved customer service, knowing that inventory is actually available. Cycle counts can achieve this because they make it possible to: Maintain the right balance of popular SKUs Make the best use of limited storage space Make it easier to manage stock rotation (FIFO) Reduce stock carrying costs and fear stock Improve productivity and increase morale A warehouse's inventory numbers can be skewed or miscounted due to many factors. These errors can creep in at any touchpoint while the inventory is in the warehouse, including when goods are first received or put away. Mistakes can also be made during the picking, staging and shipping phases, and it's worth mentioning that a chaotic, untidy or disorganized warehouse has a negative effect on accuracy and efficiency. While most missing inventory eventually turns up in the wrong location, inventory that is missing, damaged or stolen costs businesses dearly. As an example, let's say that $1,000 worth of a product goes missing. Assuming the product has a 5 percent margin, the warehouse needs to sell an additional $20,000 worth of those goods just to recoup its lost costs. That doesn't take into consideration the possible impact to customers caused by delayed or cancelled orders. As a yardstick, the median inventory shrinkage as a total percentage of inventory should generally be close to 0.2 percent, while best-in-class operations are able to reduce that to less than 0.005 percent. Likewise, the median for losses due to material handling damage is often around 0.05 percent, with best-in-class teams keeping that figure down to 0.002 percent. For many warehouses and distribution centers, shrinkage is often closer to one percent, meaning that there is enormous room for improvement. Daily cycle counts as part of a warehouse team's regular routine directly deliver a host of benefits to warehouse operations.

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