To truly make the most of inventory control initiatives, it is essential to establish protocols and schedules around stocktaking. Stocktake involves counting stock in hand and comparing it to the reported figures from the inventory management system. The purpose of stocktake is to ascertain any discrepancies and act upon them to ensure efficient stock management.
Stocktaking is not the laborious process it used to be. Before the invention and prevalence of user-friendly stocktaking technology, individual items were counted and recorded manually on forms, which could be an extremely time-consuming process.
Modern stocktaking procedures take less time and have the potential to provide more comprehensive and accurate reporting. Still, stocktakes are the best way to highlight slapdash inventory management at the store level.
A stocktake helps a business to reconcile the stock they believe they have according to their reporting system with what they actually have. Stock takes need to occur at a given moment in time, so are generally carried out after hours or during a halt in trading to ensure no SKUs are moved in or out while the stock take is being carried out.
This can be more challenging for an online business or 24-hour operation. Stock takes are usually completed at planned intervals such as the end of the month, quarter or financial year, allowing management to confirm that the inventory records are a true reflection of the physical quantities that the business is holding.
Conduct effective stocktakes
It is clear why stocktaking is an essential part of the retail management calendar.
It follows then that we consider how stocktakes can be done to minimise the negative impact on staff having to conduct them, and maximise the level of data accuracy as a result.
The process is deceptively simple.
1. The records of purchases are added, and sales are subtracted from a starting inventory figure (from the last stocktake) resulting in theoretical closing stock.
STARTING INVENTORY + PURCHASE – SALES = THEORETICAL (RECORDED) CLOSING
2. Carry out a physical stocktake, total the figures and compare with the theoretical closing stock
THEORETICAL (RECORDED) CLOSING STOCK VS PHYSICAL (ACTUAL) STOCKTAKE
* If the physical total is less than the theoretical total a stock loss is the result
* If the physical total is greater than the theoretical total a stock surplus is the result
On the day, or most commonly in retail on the evening of stocktake, the following guidelines are helpful:
1. Ensure all sales, returns, exchanges, stock receipt, and deliveries have been accurately processed up to the time of stocktake commencement
2. Carefully plan how counting is to be done and recorded and by whom
3. Manage the inclusion of goods received without an invoice, merchandise out on loan or for repair, credits due to customers, stock transfers in or out to other stores, and sales not processed to ensure correct stocktake results
4. Ensure staff are trained in stocktake procedures
5. Ensure use of appropriate stocktake procedures and supporting tools and resources
Variances and discrepancies
Effective stocktaking is all about identifying and understanding the reason for unacceptable variances or discrepancies between actual and recorded stock levels. In reality, most product lines tend to show some variance between actual stock levels and recorded stock levels.
If the margin of variance is unacceptably high, the problem needs to be investigated. With any variance, it’s important first to examine the figures to make sure there haven’t been errors in the stocktaking process itself.
This may necessitate:
- Recounting specific areas of stock
- Checking that all stock received has been entered accurately into the system
- Making sure that any stock movements have been controlled and accounted for
- When it’s clear that the physical stock take is accurate, you can look closer at the causes of variance.
- In many cases, discrepancies that are still apparent after a human error has been discounted are due to issues of internal or external theft.
Report accurately on stock inventories
Reporting on stock inventories is the final piece in the efficient stock control pie. Doing so to a high level of accuracy is important for teams across retail operations, and provides a point of reference for questions of business strength and sustainability.
Generally, reporting is generated via a POS, RMS, or other dedicated Inventory Management System. Regardless of the specific system, there are commonalities in the kinds of reporting they need to be able to provide.
Detailed information on the following as required:
- Stock receipts
- Stock dispatches
- Stock returns due to damage, incorrect orders, etc.
- Stock take & related discrepancies
- Stock loss due to shrinkage
- Stock loss due to damage
- Stock turn (related to buying / merchandising)
- Cost of freight & transport
- Cost of storage and space requirements
Not only is this information important for the finance, inventory, and management teams, but certain information also needs to filter down to floor staff so they can be part of the solution in areas of their responsibility.
Key stakeholders across the business can benefit greatly from the provision of detailed and accurate stock inventory reporting, the contents of which may be used to determine future business directions and decisions.
Want to learn more about stocktake and best management practices? The ARA Retail Institute runs courses that suit everyone from the job seeker, to frontlineand senior management. Click ‘Training Workshops’ below to find the perfect course for you and your business.
About ARA Retail Institute
ARA Retail Institute is Australia’s leading retail training provider for both accredited and non-accredited learning programs. For more information, please visit: www.retailinstitute.org.au