How to run a stock count that produces a usable number

The annual stocktake has two problems: it is enormous, so it is done badly; and by the time you find a discrepancy, it could have arisen any time in the past twelve months.

Cycle counting fixes both.

Cycle counting

Divide your catalogue into three groups by value of stock held:

• A items — roughly 20% of products, 80% of stock value. Countmonthly.
• B items — the middle. Countquarterly.
• C items — many products, little value. Counttwice a year.

Now no count is a huge event, your valuable stock is checked frequently, and a discrepancy is at most a few weeks old — recent enough to investigate.

For a shop with 2,000 products, this is roughly an hour a week.

Counting properly

Count blind. The counter should not see the system quantity. If they do, they will confirm it — this is not dishonesty, it is how attention works.

Freeze movement. Count a section when nothing is moving in or out of it, or record any movement during the count so it can be reconciled.

Count in a physical sequence, shelf by shelf, not in catalogue order. Counting in catalogue order means walking the shop repeatedly and missing things.

Two people for high-value items. One counts, one records.

Include everything. The stockroom, the back of the shelf, the display case, the item on hold for a customer, the goods received today and not yet put out. Stock you forget to count becomes a variance.

Handling variances

You will find differences. The question is which matter.

Set a threshold. Something like: investigate any variance above SAR 200 in value, or above 5% of the quantity for that item, whichever is more significant.

For each one that crosses the threshold:

1. Recount. Roughly a third of variances are counting errors.
2. Check receiving. Was a delivery entered in the wrong unit — a carton entered as a piece?
3. Check sales. Was it sold under a different product code?
4. Check transfers. Did it go to another branch without a record?
5. Check waste. Was it damaged and disposed of without being recorded?

What is left after those five checks is loss, and that is what to investigate as loss. Seeshrinkage.

Adjustments need approval

A stock adjustment changes the value of your inventory, so it must not be something a cashier can do quietly.

Requirements:

• A separate permission for approving adjustments
• A reason recorded, from a list
• An audit trail showing who counted, who approved and when

A system where anyone can adjust stock to match the count has removed the only signal that something is wrong.

What to record each time

• Date, counter, section
• System quantity, counted quantity, variance
• Variance value
• Reason after investigation
• Approver

Kept over time, this is the report that tells you whether accuracy is improving, and where the problems concentrate — a product, a category, a branch, a shift.

The annual count still happens

Your accountant will want a full count at year end for valuation. Cycle counting makes that count fast and boring, because nothing surprising is left in it.

Tools

A rugged handheld (Zebra, Honeywell) makes counting several times faster than a clipboard and eliminates transcription errors. For a small shop, a phone with a camera scanner is enough. Wameed supports both; see thehardware page.

The one thing to insist on:the count must be enterable at the shelf, not written on paper and typed in later. Every transcription step is an error source.