Parker Avery recently published a new Point of View titled Inventory Accuracy – Fundamental Strategies for Getting it Right, by Rob Oglesby, our Store Operations Lead (click here to read the full copy). We are also currently working with a few retailers on helping them solve this very issue, and – knowing how critical this area is to many other retailers’ strategic initiatives – I thought I’d highlight some of the key points we make in this publication.

Consider this your Inventory Accuracy Cliff Notes.

In this publication, we identify and discuss 4 major causes of inventory inaccuracies:
• Counting too much
• Treating the store as one big bucket
• Assuming receipts are accurate
• Thinking more (merchandise) is better

We’ve seen instances of retailers who have their counting processes down to a science. They’re always counting something (or several things), thinking this will yield better results and more accurately inventory. Yet somewhere along the way, they forgot some of the reasons why they continue to count or fail to explore some of the root causes for prompting a count. They just know their inventory isn’t right and needs to be trued up, so counting is the only strategy they think they have. But some of the fundamental processes leading up to the count have gone wrong. Like what? Receiving, putaway, location definition, scanning consistency. This perpetuates a never ending cycle of counting, truing up, replenishment issues, and more. And doesn’t get the retailer any closer to inventory accuracy.

Location definition? Yes, that’s one that may be hard to swallow – because if an item is “in the store” in the system, isn’t that good enough? No, it’s really not. Because when you go to count an item or – even worse – find it for a customer and it’s not where “you just saw it” the result is not what you want. Location definition and consistent tracking / logging of product movement to and from those locations in your inventory management system is key. I was in a major book retailer not long ago, and “the computer” said there were a few copies of the book my son wanted in stock, but it took 2 sales associates over 10 minutes to locate the book because it was on a special display…in the bookstore’s window.

Inventory receipts are another tough one. Suddenly the store is slammed with a huge amount of new inventory – often with no advance visibility of what’s on the truck. And now they’re expected to actually validate the items and quantities? Don’t you know they have to figure out what to do with all of those boxes? Receiving is where a great deal of inventory accuracy issues begins. First by not following adequate merchandise receipt validation processes, then by staging the new merchandise somewhere prior to being stocked on the sales floor, then not using proper location definitions…you can see where this is going.

But before the receiving process can even happen, we have to figure out how much product the store actually needs. Now we come full circle: replenishment. Because of the afore-mentioned incessant counting, “truing up,” placing reorders (for merchandise that may not be needed), etc. our replenishment and allocation logic is rendered almost useless because it’s relying on system-generated inventory quantities that are not right. So what happens? The store gets more inventory to deal with. But isn’t it better to have the item in stock if a customer wants to buy it? Well, yes…and no. If your shrink numbers are through the roof and your store labor is tied up with managing all of this excess inventory (and not able to serve customers) – I wouldn’t call that “better.”

I wrote about this same topic several months ago in a blog post titled “Inventory Accuracy Strikes Back” (click here to read). I – the customer, based on previous events – had no confidence in the retailer’s inventory accuracy. In that scenario, I was happily surprised when I found the product I wanted – despite the fact that their online quantity was…Not in Stock.

We hope you find Inventory Accuracy: Fundamental Strategies for Getting it Right insightful and that it helps you think through and solve some of your own inventory dilemmas.

Shop on.

– Tricia

Published On: June 5, 2014Categories: Inventory Optimization, Store Operations, Tricia Chismer Gustin