by Stock taking or stock counting is one of the routine processes carried out in the warehouse. The goal is to count how many assets you physically own, in this case inventory, and how many assets are recorded in your records or system.
The inventory itself is actually quite easy to do. I have written the method in the previous post.
Problems will arise when there is a discrepancy between the results of the physical inventory count and the amount of inventory recorded in the system. Sometimes, it’s not just the big differences that matter, even small differences can be exaggerated by some.
Usually there will be two opposing opinions here. Warehouses will tend to ignore small differences (say under 1%) and submit inventory adjustments in the system. Meanwhile for others, for example the accounting department, they are still required to find out where the discrepancy lies before agreeing to make adjustments.
Then how to handle this dispute?
This is the topic that we will cover in this post. But before that, make sure you have also joined the scmguide telegram channel to continue to get notifications of the latest posts from this blog, as well as get more insight about supply chain management from the channel.
Table of Contents
If there is a discrepancy in the results of the inventory count
Ideally, all discrepancies in the calculation results should be identifiable. This is important so that you know how to prevent it in the future.
However, if the difference is small, then an agreement is needed between the parties regarding the extent to which the discrepancy needs to be analyzed further, and how much discrepancy is allowed for direct inventory adjustments.
Some people are quite strict about this. Especially when they have no idea how the operations in the warehouse work. And it gets worse when they just demand 100% accuracy without knowing what to do to achieve it. Meanwhile, the warehouse team, which carries out inventory control activities every day, feels that it is normal for a slight discrepancy to occur, especially since it is still below 1%.
For recounting, it is not an easy matter. Especially if you have a lot of inventory.
And often both parties are equally adamant in their stance.
Then what happens if the discrepancy in the results of the inventory count is not adjusted in the system?
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The impact of not adjusting the discrepancy in inventory count results
There are several things that might happen when the disputing parties cannot find an agreement to make inventory adjustments.
Operation hampered
When the warehouse has to do a recount, it means that there will be more lost warehouse operational time that they should be able to use to do their routine work. After all, if discrapancies in inventory results are small, even if they are found, the impact will not be significant. In this case, if we compare the time wasted on recounting with the value of the inventory found, it would be better if the difference is adjusted immediately.
And of course you know, when you keep a large amount of inventory, with a lot of SKUs, discrepancy in stocktaking results is very difficult to avoid. Especially if it is not supported by a reliable Warehouse Management System.
The important point: not in the small discrepancy between the physical inventory and the one recorded in the system, but in the accuracy of the counting results
In the inventory counting process (stock taking), the most important thing is the accuracy of inventory counting. The accuracy of the inventory recorded in the system is important. However, that doesn’t mean anything if your inventory counting accuracy is poor. The counting accuracy I mean here is the result of a physical count compared to the actual physical quantity of goods.
There is potential for data manipulation
Usually, when people are constantly pushed to look for causes of minor discrepancies in inventory results, they are more likely to be tempted to manipulate the results.
They don’t want to be bothered by “small” things that don’t have a significant impact on their operations.
If something like this happens, then the impact that arises will be even greater. And one of the worst impacts of this situation, besides the chaotic planning process because it is based on inaccurate data, is the loss of transparency from the relevant departments. Especially if no solution is offered as a way out.
Conclusion
Discrepancies in inventory counting results are often difficult to avoid. There must be an agreement regarding the discrepancy limits of stocktaking results that need to be analyzed further and the discrepancy limits that can be directly carried out by inventory adjustments.
As long as the discrepancy in the results of inventory counting is below the agreed limit, it can be considered as an operational loss. Which of course would be better if over time it could be reduced.
To some degree of discrepancy, it’s okay to be firm and rigid before inventory adjustments are made. However, the realities of operations in the field must also be understood. Especially if the operations in the warehouse are still in the development stage, so there are still many deficiencies here and there. The most important thing is to keep improving from time to time.
Keeping all functions transparent, is also very important.
This is the main basis of an effective and efficient supply chain operation. So, slightly relaxing the allowable discrepancies in the inventory count results, is sometimes a better decision.
Hope it is useful!
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