Improving Inventory Accuracy with Barcode Scanning, RFID, and Better Data Practices

Inventory control and management is both a data quality issue and an executive-level concern. Lack of inventory accuracy can lead to difficulties in replenishment, fulfillment, warehousing, and planning.

The solution usually deals not with adopting more technologies at a generic level but rather with defining appropriate processes with the transactional record fidelity that they require which then enables organizations to choose the right tools and technologies to improve inventory accuracy in each of their cases.

Potential Reasons for Inventory Inaccuracy

There are various reasons for inventory inaccuracies

: manual recording errors,

delayed recording of stock movements,

inconsistent procedures,

stock visibility challenges, and

infrequent physical counts. Acknowledging potential causes of discrepancies highlights areas where improvements can be made.

1. Standardize Inventory Procedures

Define and document all inventory-relevant processes. The idea is to make sure that each movement of stock is captured by an appropriate transaction in the inventory system. There should be a documented, controlled procedure that describes who is responsible for recording and when this record should happen. Inconsistencies between the actual location of the stock and its location in the system will be reduced.

1. Choose the Right Identification Technology

Depending on the level of detail and control needed, different inventory technologies can be leveraged. These include barcode and QR-code scanning, Radio Frequency Identification (RFID), and IoT-enabled solutions.

RFID-enabled inventory control and warehouse management is generally appropriate whenever RFID tags and scanners are present and can operate within the constraints of the environment. However, for most other applications, QR code or barcode scanning will be sufficient. For IoT-enabled systems, the right technology choice depends on the intended application and particular technologies present and capable of interacting with the system. Each has its advantages and choosing the best technology for a given application is important in improving inventory accuracy.

1. Ensure Transaction Accuracy and Data Governance around Inventory Records

The value of any technology in inventory management is directly linked to the transaction recording accuracy. An organization must define procedures that ensure quality of data entered into its inventory management system.

The critical controls to consider include whether a given procedure produces verifiable inventory results, defines fields that need to be recorded, and addresses transaction discrepancies. The integration of systems is also a critical consideration in data governance around inventory records. For example, an organization might find itself recording the same transaction in two different systems thus creating conflicting records. Where possible, systems should be integrated so that only one party records a given transaction.

A few typical control questions to ask at this stage deal with whether stock movements are always recorded at the moment they occur, whether it is possible to determine the exact location of a given stock at any moment and, critically, whether inventory identifiers are consistent across different systems when they should be consistent. The main point is to ensure that, across the relevant departments, people use the same record as a reference point whenever a problem or discrepancy occurs.

1. Implement Cycle Counting to Improve Inventory Accuracy

Physical stock counts can be a disruptive and time-consuming affair. Cycle counting allows an organization to analyze discrepancies between the recorded and physical stock levels by regularly and repeatedly counting only a fraction of the total stock. In effect, rather than comparing the entire book stock with the actual stock once a year, an organization only compares a small sample, which is significantly less time-consuming and disruptive. The benefits of cycle counting will only be realized if the most crucial items are counted first based on a prioritization scheme.

The issues identified during cycle counting should be prioritized and resolved. Note that in most cases, correcting the discrepancy is usually not enough – identifying and addressing the root cause of a discrepancy is also critical.

1. Measure Performance Metrics and Continuously Refine the Process

When it comes to refining the process and improving inventory accuracy, there are a few important performance areas. First of all, inventory accuracy itself is a performance metric that should be tracked over time and compared to industry benchmarks. The number of stockouts is also a useful measure that needs to be weighed against general demand. Inventory turnover should also be tracked and compared to the industry’s average. Other important metrics are the accuracy of order fulfillment and the rate at which discrepancies are resolved.

It is important not to overemphasize any particular metric and to look at the overall trend rather than focus on individual instances. For example, a high inventory turnover rate is not automatically negative and might simply indicate a high volume of transactions.

1. Summary

An organization that wishes to improve its inventory management and control processes and increase inventory accuracy should consider a combined approach of refining procedures, choosing the right identification technology, focusing on data accuracy, implementing cycle counting, and measuring performance. These steps will increase process efficiency and allow for informed business decisions that consider the firm’s level of operations and complexity.

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In essence, improving inventory accuracy relies on technology only indirectly. It is a matter of implementing an appropriate process for a given organization, which may call for using scanning solutions and technologies as tools, but should ultimately realize broader business benefits.

7.Conclusion

Improving inventory accuracy is a complex endeavor in which every business process has to be optimized for efficiency. The core principles still apply – make sure to standardize, utilize available object recognition tools, record transactions accurately, implement cycle-counting initiatives, and continuously refine and improve to keep the necessary business processes aligned with real-world stock performance.