What is inventory checking? Why is it important in all companies? How to manage inventory checking in ERP software?
Even in the most organized systems, there is a difference between the physical count of items and the one presented in our system (business books).
There are many reasons for this, and the most common ones are:
- A simple swap of similar items;
- Errors during packing/receiving;
- The inability to measure the items correctly (especially bulk goods);
- Expiry dates;
- Shrinkage due to chemical process (eg. coffee beans’ volume shrinks as they dry out);
- Items not being picked by customers.
However, in this blog, we won’t deal with reasons, we will focus on how to efficiently compare physical count with ledger reports and adjust inventory count with ERPAG.
The comparing process in ERPAG is called “Inventory checking”, while the harmonization is called “Deficit/Surplus”, or “Stock adjustment”.
First, each company based on its business practice determines the frequency of inventory checking. Some companies do it at the end of the business year, some do it at the end of the season, and others do it ad hoc, by the management request.
Second, for inventory checking, we set up the ‘scope’. The scope can be the whole warehouse or adequate item group (Shelf, Product category, Trademark, etc.)
When setting up these parameters, make sure you pay attention to the duration of the inventory checking process. The scheduled time for inventory checking must be short as possible and in time when the intensity of changes in inventory is low.
Note: When you do the physical count of items in stock, then (for that scope) there must be no changes in the inventory (no purchasing, no selling, no material loading, delivering finished goods, etc.). If the changes are made while the inventory is physically counted, it’s impossible to harmonize the inventory adequately.
2. Creating new inventory checking
When you create a new inventory checking document, you will have to immediately select the “scope” (group):
After selecting the “scope”, select the shelf:
In the mobile app (iOS, Android), you can open the new inventory checking from the main menu.
3. Physically collecting the data
Based on the possibilities, equipment and the product type itself, counting the inventory physically can be managed in various ways. Therefore populating the inventory checking in ERPAG can be different as well.
4. Manual entry in ERPAG table
Entering in ERPAG table is the same as in all other entries, select the item from the drop-down menu and enter the quantity you physically counted.
5. XLS spreadsheet entry
In case you physically counted the inventory, and entered values in a spreadsheet (Google Sheets, MS Excel, etc.), 2 columns are enough – “SKU” and quantity.
By selecting the columns and CTRL+C and CTRL+V into matching columns in ERPAG table, you are transferring the data.
6. Scanning barcodes directly into ERPAG table
If you have barcodes entered for your items, an option for barcode entry will appear on the right side.
If you have a handgun (barcode scanner), the entry is managed in the marked field. As you scan the items the quantity is automatically increased by 1.
After the scanning is completed, with the option “add to document” the scanned items are transferred to the document.
7. Scanning through the Mobile App (iOS, Android)
With the mobile app, through the camera of the device, optical recognition of the barcode occurs, or you can enter the barcode or the SKU of an item manually through the keyboard on your mobile device. Just as in scanning with a handgun, the item quantity is increased by 1 after the scanning. If you need to correct the quantity, it’s possible after you activate the item from the list.
8. Compare to stocks
After you complete the inventory checking and enter it in ERPAG, the next step is “Compare to stocks”.
With this option, you are comparing the data with the current inventory count in ERPAG.
The first thing system checks is if the entered items match the selected “scope” (group).
In the example from the picture, the item “Rim 15” is from a different shelf. We didn’t put the logical control in the item input list, because, in practice, it often occurs that the items are on a different place by mistake. In our example, these 2 pcs are physically on the wrong shelf. In order to speed up the inventory checking process, we allowed the entries from different locations, but when it comes to comparing with stocks, the operator must choose what he will do next. Maybe on another inventory checking document, these 2 pcs are missing? The decision is up to the operator.
After comparing, new columns are added – “quantity by ledgers”, “deficit” and “surplus”.
In the mobile app, comparison to stocks is done through the button in the upper right corner.
And that’s it for the mobile app. Because of the complexity of the inventory checking, the surplus and deficit can’t be done through the mobile app.
Note: The comparing is done for the whole “scope” (group).
An example: If we enter that only one item in the list, and the “scope” is set for the entire warehouse, the items that are in stock will be added in the list, and since the physical count is 0, the almost entire warehouse will be in deficit.
If you make this mistake, the option “Undo” is here to save the day!
9. Harmonizing the inventory in the system with the physical count
After comparing to stocks, if you have a difference, you have an option to create a deficit and/or surplus.
The deficit, in our example, will decrease our inventory:
While the Surplus will increase our inventory:
The example of a stock card for the deficit:
An example for the surplus:
10. Working with Serial/Lot numbers
With the items that are tracked by serial/lot numbers, you will only enter the inventory count. From our experience, when doing an inventory checking for such items, entering the serial/lot numbers on the spot, consumes a lot of time. With technical devices and components, doing an inventory checking with serial/lot numbers is practically impossible. Entering a 1000 serial numbers just to have a difference on a few of them is not worth the time.
Our concept is to do the inventory checking ASAP, compare it to stock, and if there’s a difference, just enter the serial numbers for the difference in count.
The entry of serial/lot numbers is done when you are forming the deficit/surplus.
2019. ERPAG Inc.