Let's face it no one likes to count inventory a couple times a year and basically shut down their business to do so. Well if you are doing cycle counts every day or every week, you will count your inventory more frequently and in most cases it will be more accurate. And if you are noticing certain products or certain orders are messed up, you can look to figure out why these problems are being created.
Did your supplier send something you did not order? Did they short ship you something? Did they enter the purchase order incorrectly on their end? Did you enter the purchase order incorrectly on your end? Did you count it in wrong?
One tip to catch some of these problems is to do a three way match between your purchase order you sent the supplier, their packing slip they sent you with the order and the invoice your supplier sends you. You will be amazed at how many problems doing this pretty process will catch. Then you need to figure out why this is happening and what you can do to fix it.
We always had a couple vendors that would send us stuff we did not order or short ship us stuff or over bill us. We knew to watch those shipments very closely and if there was a problem to go contact the supplier right away.
You don't want to pay for something you did not receive and you don't want to take in additional inventory in an item you already have in stock. E.g. if they sent you the wrong inventory and you already had that particular inventory already on the shelf.
When we first started out, we did not do this three way match and man I wish we did. We would catch errors on a regular basis that over the course of the year added up to some serious money.
Next blog about operations will feature a discussion about safety stock, economic order quantity and reorder points.