Inventory Management Best Practices

We recently invited Intacct Marketplace Partner, QStock Inventory, to share some insights around the topic of inventory management. QStock Inventory extends the native inventory capabilities in Intacct for product-based businesses that have unique needs that may require additional specialized inventory management software. We hope you’ll find this information useful.

Cycle Count vs. Periodic Full Inventory Counts
In the hustle of year end, many of us had an interesting experience that we see over and over again and perceive as normal. Accounting and finance calls and asks for another full inventory count, and has the warehouse take a weekend of overtime to produce a spreadsheet that they email back.

With cloud computing, and all the technology available, many of us are still doing this massive task in an old school way. What hurts more is that some of us end up doing this monthly.

QStock takes advantage of Intacct’s web APIs to keep perpetual inventory, automatically syncing transactions between both systems so your inventory is always up to date.

Inventory is such a large line item on so many balance sheets, but we often take it for granted. Many organizations will run a full inventory count only once a year to make sure their numbers are in line for banks, investors, and taxes. Some do this every month or even every week!

Our greatest assets are swept under a rug so only the warehouse deals with it:

  • Finance needs to have a clear view on inventory levels so that they can properly valuate it and communicate it to banks, investors, and for taxes.
  • Operations needs to know the quantities so they can get our hands on and ship product, but not only how much they have, but where exactly that product is in the warehouse.
  • Purchasing needs to know what they have to coordinate with vendors and pricing to make the best purchasing decisions.
  • Sales needs to know what we have so they can offer incentives and quote lead times
  • Customer service needs to be able to see what is on the ground, inbound, and promised to support customer requests
  • Marketing needs to know what to products to promote and how their promotions are performing based on throughput

Many organizations realize this visibility to inventory is critically important, so they perform what they call “cycle counts,” but in reality are periodic full inventory counts.

Ask yourself these questions:

  1. Do I have to stop production, receiving, shipping, invoicing when I count product?
  2. Do I pay a large portion of my staff overtime, or do I bring in extra hands to help count?
  3. Do I need to count everything on a yearly, monthly, or even weekly basis?

If any of those are true, then you may be missing a huge advantage to true cycle counting.

A true cycle count is non-disruptive so you can continue receiving, picking, packing, shipping, invoicing, and your regular activities while you count. Since it is non-disruptive, you should not have to pay overtime, nor should you have to hire help to perform these counts. Lastly, a true cycle count is something that happens on a daily basis, so your inventory is perpetually accurate and reliable.

If you had confidence in your inventory figures, how would your organization be different?
Finance could focus on greater returns like FIFO layers, purchasing would become more streamlined and cost effective, sales would look like supermen because they had the answers and their orders were being fulfilled, customer service requests would drop, marketing could be planning further out, your operations team would get their weekends back, and you would be able to reduce overtime.

So what does Cycle Counting look like?
Cycle Counting is an action that a warehouse person can perform on the fly. They would count one bin at a time, updating what the system thinks is in that bin to ensure accuracy. Those postings would be reviewed by a manager and posted through to the rest of the systems. Usually this is done at the end of the day and counting only a small section of the warehouse so that at the end of the period (Month/Quarter) the entire facility would have been counted.

We are already doing Cycle Counts, what is next?
Cycle Counting is first implemented by counting just a few bins per day, and is a huge cost savings over full inventory counts. Once that savings is realized and the company starts adapting to the new reliability on information, there are other ways to improve.

ABC Counts look at your inventory in a unique way to make sure your efforts return the maximum result. First would be an analysis on your inventory, factoring in valuation and throughput to give an overall score. Essentially you would want to count your flat screen TVs most often (A Items) because they are very valuable and move quickly, while you might count nuts and bolts less frequently (B Items) since they are inexpensive and maybe have less sales volume. Custom items or out of season items (C Items) you might count just once a year because they are the least impactful on your business.

By refining the way you count, you can realize even greater efficiencies in your labor spend, and increase your confidence in your overall numbers.