How to undertake a successful Stocktake

Rarely does anyone wake up and think….ohhh goodie a stocktake! Yaaaas! 

That being said, it is a necessary evil and undertaking an accurate stocktake once or twice a year is key for maintaining healthy inventory levels and minimising losses. Without a clear action plan, you face the risk of errors, such as over counting or undercounting – that could cost you thousands of dollars and lost customers. 

We are in the business of process improvement so we believe wholeheartedly in developing a well-defined stocktaking process that everyone is on board with, thereby limiting the possibility of making costly mistakes. Saving time and money, who has ever complained about that?  

Here’s our list of 7 fundamental steps for a successful stocktake. 

1. Plan, schedule and prepare

Find a time that works for your team that won’t hurt your bottom line or create unnecessary distractions. 

A lengthy stocktake is best taken during a slow sales cycle or outside of normal business operations, so consider time in lieu in advance for your team members needing to work after hours or on a weekend.  Of course you don’t always get this luxury – you really do need to do a stock take at year end, which might be a busy time – but it doesn’t have to be a drag if you get your process right! 

Whenever you do it, do clean and organise the warehouse or stockroom in preparation for the stocktake, the easier the access is to everything the better the outcome on the day! 

If a number of team members are involved, establish teams from different departments to work together. Different perspectives can really help the process and understanding of how different areas of the business are impacted by having an accurate stock count. 

Prepare your tools ahead of time. Are you using scanners or stock sheets? Do you need iPads or an app downloaded on your/your colleagues phone? If you aren’t using cloud based inventory management, then spreadsheet and stock list printouts and paper and pens are essential.  

If you need to shut down stock movements for the duration of the stock take, communicate this to your customers and suppliers.  Ensure that everything received into the warehouse has been receipted, everything shipped has been invoice AND invoiced has been shipped (or set aside to not be counted).   

2. Establish clear processes & goals

Nominate one person to oversee the stocktaking process. They should have a list of what needs to be counted and what should be in their warehouse so they can double check the work of the stock takers. 

The stock taker teams (ideally work in pairs) should know what groups they’re in, what tools they need, how they’re going to count the stock, etc. 

Also, supervisors should make sure that there are limited distractions – it’s a serious business and phone calls and sales calls while doing a stocktake hinder the process.  

Schedule breaks to keep everyone’s minds and eyes fresh so that they don’t make too many mistakes. Don’t be afraid of shouting pizza! 

3.  Know  what youre counting 

The goal of a complete stocktake is to get an accurate count of the inventory you actually have so that you can compare it with your existing inventory data. 

As outlined at point 1 your physical stock movements should align to what you have recorded, but sometimes this isn’t possible.  If that is the case exclude items that have already been invoiced to customers but haven’t yet shipped, as well as raw materials that have arrived but haven’t yet been entered into your inventory system.  Stock that hasn’t been shipped is essentially not yours anymore. Processing materials that haven’t been added into your inventory management system is a separate task that doesn’t need to be done during a stocktake. 

These comments also apply if you are doing a partial stocktake.  Typically at June 30 you will count everything, but a great way to keep your stock accurate throughout the year is to do rolling stock takes – for example you could count by supplier, by product category, by warehouse or bin location, doing a separate “mini” stocktake once every few weeks. 

4.  Accuracy is key 

Whether you have a huge warehouse  or a small stockroom, let stock takers know which sections they’ll be counting and in what order. 

  • Working in pairs where one person inspects the stock and calls out the amount, the second person records this and can double check the first. 
  • If you have multiple groups of stock takers, make sure they all have clear sections to work through that don’t overlap. 
  • Have your stock takers to count in the same direction – i.e. top to bottom, left to right. 
  • Mark stock with a  highlighter or post it notes  as a visual reminder of what’s already been counted. 
  • Open and count everything. Near enough isn’t good enough! 
  • Be clear about “Units of measure” – do you hold items as individual units, in Kgs, by the Carton, etc. (eg am I counting 24 bottles of beer, 4 x 6 packs or 1 slab?)
  • Your stocktaking process should aim to deliver as close to 100% accurate readings as possible, which means you shouldn’t estimate or guess on any number. 

5.  Deal with variances 

Record the actual quantity counted for all items in your count, when this has been done run a stocktake variance report – this will highlight the variances by item, both in quantity and value.  Be prepared to investigate any items with variances but pay special attention to those with the bigger variances.  Small variances are less critical, and may be tolerated – for example you have counted 12,450 labels whereas the system has 12,400, but you realise the labels are worth 1 cent each – so the variance is actually only $0.50.  However a variance of 1 on an item worth $000’s should be investigated.   

The objective of a stock take is accurate stock, but you can also use this to improve processes, both in terms of what you buy and how you handle inventory in the warehouse. 

6. Value your stock

This is also a good time to review your stock values.  Any item you are holding with a cost that is higher than what a customer would pay for it (in the jargon, the net realisable value) can be written down.  This is a stock adjustment, separate from the stock take (which only concerns itself with quantity). 

7. Review the process

Chances are you’ll be doing a stock take once or twice or year, it’s important to do a team debrief on what worked well and what didn’t, so you can improve your process for the next one. You may want to investigate cloud based app to help you better manage your stock before the next one! If you want to do that, please reach out, we have plenty of options at our disposal for you.  

Download our stocktake checklist here.

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