30 January 2023

8 Reasons for Poor Inventory Accuracy

30 January 2023

Understand the importance of inventory accuracy for your business, discover what could lead to low rates, and learn how to correct errors.

There is a lot of talk about inventory accuracy and the benefits it can bring to profits and competitiveness of companies. But are you avoiding the main mistakes that lead to low levels of this indicator and, consequently, generate losses for your company? How can you prevent these issues from occurring in your warehouse?

In any company, regardless of the segment, it is common for errors to occur in warehouses, which can negatively affect the workflow performance to a greater or lesser extent. One of the main and most recurring failures found in DCs is related to stock control and informational discrepancies, which affect the entire logistics in purchasing and sales processes, delay deliveries, cause product losses, and increase storage costs.

These problems can be avoided with accurate inventory, that is, with better control and precision over the quantities of products stored and shipped from physical stocks. A well-planned inventory prevents stockouts, does not allow products to remain inactive for a long time, and prevents losses and damages related to poor preservation or expiration dates.

Although it may seem like a simple process, it can be difficult to achieve a sufficient level of accuracy, especially in warehouses where 100% manual processes are still applied or where there is no standard for process development. In these cases, it is common to observe discrepancies in information between physical stock and recorded stock, causing disruptions in the workflow and customer dissatisfaction. If this is happening in your warehouse today, it’s time to review your planning and avoid the most common mistakes as much as possible, in order to increase the level of inventory accuracy.

Below, we detail 8 situations that could occur in your warehouse and affect accuracy.

1. Missed Receipts

Let’s make an analogy with a soccer match: the first and perhaps most important position is the goalkeeper; he is responsible for preventing the goal, especially if the defense system fails. Even if we have a great defense on the field, the absence of the goalkeeper implies the team’s vulnerability, allowing the opponent to easily score a goal. When we apply this scenario to daily warehouse operations, we mean that no matter how good your team is at receiving goods from suppliers when they arrive at the dock. If the products are not properly checked, stock accuracy is compromised and the rest of the flow is vulnerable, subject to errors and failures.

It is important that all items at the time of unloading at the dock are checked with the utmost attention. This includes, in addition to visual inspection, the confirmation that all goods comply with the invoice and are in good condition. And, even if the utmost attention is paid, manual checks tend to present occasional information errors, which is why it is advisable to invest in management software that allows greater accuracy in counting and stock control.

The WMS system, for example, allows for a “blind” conference, cross-referencing the items indicated in supplier shipments, along with the manual count performed by the employee, thus ensuring greater information accuracy and a credible stock. Additionally, with the WMS, it is possible to insert counting routines at the reception itself, that is, when the product enters the DC, it is inventoried, thus maintaining reliable and up-to-date stock data.

2. Lack of Allocation Methods (such as FIFO or FEFO)

One of the biggest mistakes that can also compromise inventory accuracy is incorrect storage processes in the DC. When the decision on where to allocate each product is made manually and without criteria, it is normal for older products to be forgotten at the back of the shelves, thus expiring or losing warranty, causing significant losses in stocks and directly damaging accuracy.

One way to solve these problems is to implement inventory organization and turnover strategies, such as FIFO or FEFO, whose purpose is to prioritize goods in line at their positions. In this way, the first items to be shipped to customers are also the first to enter the warehouse or those approaching the expiration date.

The main advantages of this strategy are:

  • Allows identifying products that remain in stock for a long time and what costs they represent for the company.
  • Reduction of search times in the warehouse for products close to obsolescence.
  • Positively enhances the company’s image, in the sense that it sends products always in good condition.

With a WMS, it is possible to implement this inventory organization in a 100% automated way and in compliance with FIFO and/or FEFO allocation rules. The system is able to recognize and direct products as soon as they are recorded upon entry, indicating the best placement within the stock, optimizing storage organization, product rotation, and consequently, accuracy.

3. Inaccuracy in Recording Items Entering and Leaving the Warehouse

Just as the control of goods during reception is important to avoid problems during the flow within the warehouse, failure to monitor product output can affect poor inventory accuracy. This is because information can be lost during shipping, generating inaccuracies in the count of physical items present in the DC, especially if products are shipped in different units of measure than those in which they arrived.

Imagine if a packet of cookies is sent to a customer and, in the inventory record, there is information that a box is left? This small defect can greatly affect accuracy and compromise purchasing decisions. In the end, a cascading effect occurs, and the entire operation is jeopardized.

4. Inappropriate Layout

When designing a warehouse layout, it is necessary to consider some fundamental points, such as:

  • Avoid having reception and shipping close together. Even if it may seem obvious, it is important to design a separate loading and unloading space, so there is no confusion between activities and products received in the wrong places or products sent incorrectly.
  • Well-identified similar products. Imagine a company that sells blouses. It is likely that, in this case, the warehouse handles pieces of different colors and sizes, and adding up the combinations, several possibilities open up. In this way, each product must be well identified and at a different address, avoiding any possibility of incorrect shipping or errors in stock registration.
  • Marked addresses: just as products must be labeled, addresses must also be identified, to avoid errors both in assignment and separation. Any errors in one of these processes end up resulting in inadequate registration and low accuracy.

Although they are efficient suggestions, if applied manually, they can require a lot of time and planning work. Therefore, it is advisable to invest when possible in inventory management systems that, based on models identified in the warehouse, are able to accurately register each item and address and design a location map that keeps stocks organized.

5. 100% Manual Processes

Perhaps this is the biggest impact on poor inventory accuracy. When all warehouse processes are performed 100% manually, there is a wide margin for error. A small mistake in receiving goods here, another in separating the order there, added together, can represent high losses for the entire company.

Investing in good management software will give you the assurance that errors will be avoided and processes will be carried out with absolute assertiveness. A system like WMS is able to guide and require tasks from your company’s employees, tracing the best paths to perform a task in the best time and efficiency, signaling errors and showing the entire operational flow in real-time. Therefore, any discrepancy in information is monitored, and notifications are issued so that discrepancies can be resolved immediately. This maintains high inventory accuracy.

6. Lack of Communication with Suppliers

Imagine that your stock is ready to receive 10,000 units of a certain product based on the sales demand already mapped by your team, but due to some communication noise between you and your supplier, only 1,000 units of that item arrive? This is a delicate situation and is likely to occur in some companies that do not maintain integrated communication with their partners. And what’s worse: it can not only damage accuracy but also the flow of operations and customer service.

Requesting information and sending alerts about the items and expected quantities arriving allows you to better anticipate and prepare for unloading and allocation of products in the warehouse, as well as ensuring that registrations are made correctly, without data discrepancies.

7. Stock without Real-time Visibility
8. Low Inventory Frequency

Some companies prefer to conduct a single inventory per year, which can be a big mistake. Items stored incorrectly or even small inaccuracies in quantity information can lead to serious losses if identification is delayed.

There are situations where companies have suffered irreparable losses because they gave up conducting cyclical inventories, and when they discovered errors that could have been avoided earlier, it was already too late. On the contrary, performing cyclical inventory has provided excellent results for warehouses that had reported items as lost and ended up finding them in a new count, meaning a loss was converted into a gain.

Stand Out in the Market with WMS

Your company can stand out in the market by achieving record inventory accuracy rates, exceeding 99%. This is possible when investing in good technology. With Deagor WMS, you have an integrated system by your side that offers a series of essential inventory models for routine inspections and monitoring of warehouse movements.

With it, you ensure records, data, and information from receipt, to order picking, to shipping, with details and real-time monitoring of all stages of the distribution center workflow.

Rely on Deagor in your business journey. We have gathered a portfolio of clients who have taken a step towards Logistics 4.0 and who today use the WMS to maintain product traceability and stock organization, as well as to implement efficient inventory policies and increase stock accuracy rates. Contact us and count on a specialized team to enhance your business.


8 Reasons for Poor Inventory Accuracy Deagor WMS per ecommerce può aiutarti!


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