As companies set priorities for 2010 or next year’s budget, it is important to understand where to start. So, why should inventory accuracy be a top priority?
- It’s required from an accounting standpoint. Typically speaking, inventory can be a substantial number on your financial statements. What could be more important?
- It’s cornerstone to your ability to manage inventory levels (which affects your cash). After all, if you think you need to order an item because you don’t have enough in inventory and then find out that you have more than you thought, you have just paid to bring in inventory you don’t need (which will tie up cash).
- Inventory inaccuracy will negatively affect your warehouse efficiency: For example, if you are pulling inventory for a truck and find that the inventory is not where it should be, you have wasted time. You wasted the time going to the wrong location. You have wasted the time preparing incorrect paperwork. And you’ve wasted the time you’ll have to spend to find the inventory and/or address the issue.
- Inventory inaccuracy can increase freight costs: Following the last example, if you cannot find the inventory, you might have to send a partial truck. Thus, each item will cost more to deliver and, in some cases, it can lead to higher incidents of damage.
- Customer Service: If the inventory is not available as expected, the customer will receive a late shipment or a partial shipment with a potential for damaged material. Not a way to win loyal customers!