Beer wholesalers make regular counts of inventory to ensure the physical inventory on the floor agrees to the inventory in the computer.
Unfortunately, it rarely does.
When there are inventory variances, the knee-jerk reaction is to count again, or count more frequently.
However, more often than not it’s the count procedures themselves that are the problem.
Here we’ll explore three big mistakes that are often made when conducting inventory counts, and what you can do to avoid them.
Inventory is a huge driver of cash flow, with millions of dollars flowing into and out of the warehouse every year. Taking the time to avoid these mistakes, and examine your inventory count procedures is well worth the investment.
Mistake #1 – Trying to count too much, too quickly
Everyone loves the idea of the full physical inventory. We shut down operations, have everyone come in on a weekend, and make the inventory perfect. This will give us a clean slate and we’ll know for sure that inventory is accurate. Wrong.
Big mistakes happen when trying to count too much, too quickly. Often, the count is rushed (who wants to count inventory on a Sunday?) and in order to count everything, you have to recruit people who are not properly trained. Often its someone from sales or admin that has no experience in how to count properly or accurately. The result is a bad count.
Instead of a rushed count, consider an Inventory Cycle Count system. This approach allows you to count small amounts of inventory, in an orderly fashion, on a regular basis. The results will be improved accuracy of the count and your inventory value.
Mistake #2 – Not controlling the environment
One of the biggest challenges in conducting an accurate inventory count is controlling the warehouse environment.
Inventory is always moving. Trucks and trailers are being unloaded, and product being picked for customer orders. Moreover, inventory is often stored in multiple locations throughout the same warehouse, or located in two or more warehouses.
Business must go on, but the environment must be controlled for an accurate count.
Prior to conducting an inventory count, use a checklist to ensure the count environment is properly controlled. The results will be a smoother count, and more accurate inventory.
Mistake #3 – No incentive for your counters
The X factor in successful count is when the counters care about the outcome, and have a stake in the results.
Some distributors will use a pay for performance incentive for inventory accuracy. The inventory variance goal is posted, the team understands how the number is computed and they are paid to achieve the goal and improve accuracy.
Counting inventory can be a dull task. Providing an incentive to do the count and reward for accuracy is a spoonful of sugar to help the medicine go down.
Consider using scorecards and incentives for your count team. The results will be an engaged count team, and improved inventory.
Want to learn more actionable strategies to improve Wholesaler Cash Flow management? Check out the Beer Business Finance subscription.
