Outsourced routine control: the schedule and reporting rhythm

In many companies the warehouse is counted once a year, and for the other eleven months the books run on trust. An error that appears in January is found in December, and its cause is already hard to trace: documents lost, staff changed, goods sold. A spot check counts not the whole warehouse but a small part of it, and does so often. So a problem shows up within a month or two instead of waiting for year-end.

What to check, and how often

Not every item is equal. A simple way to divide them is into three groups by value and turnover:

• A: the most valuable or fastest-moving items, checked every month;
• B: medium items, checked every quarter;
• C: slow and cheap items, checked two or three times a year, by sampling.

In addition, items where an error turned up at the last check are checked again the following month. This is the rule that pays off fastest: an error seen once is likely to recur.

A hypothetical example: a warehouse of 5,000 items. Group A holds 500 items checked every month, so 500 a month. Group B holds 1,500 items checked quarterly, so 500 a month. Group C holds 3,000 items checked twice a year, so 500 a month on average. The monthly volume is about 1,500 items, roughly a third of the whole warehouse. The figures are made up, and the real split is set by the warehouse itself. Define the groups in the first month together with the warehouse manager and review them once a year: when the season changes, so do the fast-moving goods.

The monthly schedule

Every month follows the same rhythm:

1. Week one: the list is drawn up, covering group A, the items to re-check and the next zone. It is sent to the warehouse manager in advance.
2. Week two: the count takes place, usually in a day or two and, as far as possible, without stopping the warehouse.
3. Week three: the differences are analysed together with the client's staff: documents, transfers, storage locations.
4. Week four: the report is handed over and the plan for the next month is approved.

Fix the count day in the schedule in advance, for example the second Tuesday of each month. The zones rotate each month, so over a year every part of the warehouse is checked several times.

The rhythm of reporting

Keep the report short: a page or two, always in the same layout so that months can be compared. It contains:

• how many items were checked and how many showed a difference;
• the largest differences and their likely causes: a receiving error, a wrong location, issues without paperwork;
• whether the actions agreed last month were carried out;
• the zone and list planned for next month.

A list of differences goes in an appendix: code, name, book balance, counted quantity and a comment.

Let handing over the report by a fixed date become a habit, for example by the third day of the month. A short report gets read, and a report that is read gets results. After three months a trend appears: whether differences are falling and whether they repeat in the same zone.

Roles and the routine when a difference is found

Routine control is the work of two sides. The warehouse manager receives the list in advance, arranges access and the right employee on count day, and takes part in analysing the differences. The contractor's team counts from the list, records differences and prepares the report. The accountant answers questions about book balances and documents.

When a difference is found, the routine should be the same every time:

1. another person re-counts the item at once;
2. the latest receipt, issue and transfer documents are checked;
3. if a cause is found, the way of correcting the records is agreed with the warehouse and the accountant;
4. if no cause is found, the item is checked again next month and marked on the list.

How this relates to the annual count

Whether, and in which cases, regular checks can replace a full stocktake depends on the company's internal rules and the accountant's opinion, so find out in advance. Preparing for the annual count does become much easier: the warehouse is in order and mistakes have been corrected through the year.

Conclusion

Routine control can be cheaper and more useful than one big count a year, because errors are caught while they are small. Inventory offers a routine control service: it carries out periodic inventory counts on an agreed schedule and keeps stock levels under constant control.