A stock discrepancy occurs when the actual stock you have on hand does not match what’s recorded in your inventory management system. It’s a common problem that is not only frustrating to experience but can also prove very costly if it gets out of hand. This cost can come in the form of missed sale opportunities, overstocking, dissatisfied customers and, ultimately, diminished profits.
The first step to eliminating stock discrepancies is to know what’s causing them in the first place. This can be easier said than done, because there are a number of possible reasons why this problem occurs and some of them are easier to identify and resolve than others.
Nonetheless, you have to start somewhere. Below is a checklist of four of the most common causes of stock discrepancies and what can be done to resolve them:
1. Inventory Shrinkage
Inventory shrinkage is when the quantity of goods physically in stock is lower than what’s indicated in the inventory record keeping system. Its occurrence is typically due to things like theft, fraud or human error on the supplier side, damaged goods being removed, and in house clerical errors.
Vigilance is key to keeping shrinkage to a minimum. Invest in strong security measures to prevent theft and thorough staff training to minimise record keeping errors.
To ensure that your suppliers are not making mistakes at your expense and are being 100% straight and honest in their dealings with your business, take to heart the old Russian proverb, trust but verify. It may indeed be an innocent mistake that led your supplier to deliver 140 units of a particular product when their invoice, and the original order, for the shipment indicates 150, however there could be something more devious at play. Always thoroughly check what’s been provided fully aligns with what was previously agreed upon in terms of quantities, price and item type.
Also be continuously alert to other possible forms of fraud, including overbilling, employee kickbacks, fake invoices and phony vendors.
2. Wrong Location
It may be the case that a particular stock item isn’t missing at all, but is simply stored in the wrong bin, shelf or aisle. This may occur because the item has been mistaken for a similar product or was incorrectly labelled or scanned.
Misplaced inventory is one of the primary causes of stock discrepancy and, as such, the possibility that it will occur from time to time underlines the need to provide adequate staff training. And if it continues to be a problem, you may want to look at other measures. Mark stock locations more clearly, and improve the way stock locations are organised and maintained.
3. Poor Returns Management
With so much focus being on making sales and getting products out the door, sometimes insufficient attention gets paid to ensuring there’s well functioning returns procedures in place. What can make mastering these procedures tricky is that not every returned product will be handled the same way. Sometimes a returned item will be placed back in inventory, on other occasions it will be returned to the original supplier or be disposed of.
Again this is where employee training takes a front seat. Staff need to be properly educated on the right way to record the movement of returns so that the inventory system can accurately reflect what actually happened to a returned product from the time of its arrival.
4. Inadequate Technology
If you’re confident that you’ve got the human component of inventory management (workers and managers) performing at a high level but are still experiencing stock discrepancy problems, the culprit may be your technology. Maybe your technology is simply out of date and is not keeping up with your current needs or is too difficult for your typical employees to use.
In this day and age there’s really no excuse for not having an easy‑to‑use inventory management system that provides accurate, complete and real‑time visibility of your full inventory. Transitioning from what you have now to a system that addresses all your current and future stock management may be the best investment your business will ever make. We have some tips for making a successful transition that works for you – Read here.
To find out more about how the right inventory management system can help resolve stock discrepancy issues and take your business to new heights, contact Jiwa today on 02 9409 0700 or email us at firstname.lastname@example.org.