What Is a Physical Inventory Count? 5 Best Practices in 2025

Use your regular warehouse or storage area map and delineate the areas where each count team will work. Notice how the blown-up section in the image below shows the labeling of each storage space. The best way to perform a successful inventory count is through detailed planning.

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Physical inventory counts should be taken periodically for best results–typically quarterly or bi-monthly. Counting too frequently is unproductive and will produce similar results, but counting too infrequently increases the chances of missing critical information. If you count inventory and find you need to cut back on expenses, SKU rationalization can benefit overall costs long-term. Since many brands don’t have the bandwidth to conduct manual inventory counts, electronic counting is becoming norm and replacing traditional inventory management methods.

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• A physical count also gives management insight into how much product they need to replenish or if more must be ordered from suppliers.
• Of course, your system must be able to compare the quantity that was tallied to the data stored in the program.
• These counts uncover discrepancies in inventory records and establish the sales trends of products.
• Counters add product info to each tag, and at the end of the count, staff checks the tag information against system data.
• Physical inventory includes counting the volume, weight, number, and other measurements of each inventory unit.
• It will inform you of the correct quantities to order and when you should do so.
• It helps to cut down the inventory counting process into smaller tasks, reduce operational costs, and make the process much less painful.

You’ll run into certain things that don’t have a designated spot in your store when you’re arranging your physical count. It would be best if you made a decision on how to handle objects without a clear physical inventory procedures home. Quality control procedures, such as spot-checks or validation counts, can help ensure the accuracy of the count. This might involve supervisors or other designated personnel independently counting a sample of items and comparing their counts with the initial counts.

What role does data analysis play in improving inventory management by using physical inventory counts?

Using an inventory management system can help ensure you always have the right amount of stock at the right locations to meet customer demand. NetSuite’s inventory and warehouse management solution has all the tools inventory managers need to help them track and locate stock at a moment’s notice. The system supports all the essential future-forward features such as AI, VMI, and mobile device integration. The types of inventory stock that companies need to count physically include raw materials, works-in-process (WIP), finished goods, packing materials and maintenance, repair and operations (MRO). Using the right inventory metrics can help you measure the relative success of how your company stocks and manages these inventory categories. You can use inventory turnover as a metric of success for all of these categories.

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• While physical inventory count is time-consuming and cumbersome, it’s essential to the success of any retailer.
• If you own a franchise or have a large operation, physical inventory counts every two to three months may be needed.
• However, it does require performing counts more often and will not give you insight into your full inventory numbers.
• Use inventory tags — sequentially numbered two-part labels designed for physical inventory counts — when you’re doing a manual stocktake.
• Additionally, since inventory is constantly counted and faults can be found promptly, it enables any inconsistencies to be resolved sooner.
• TranZact helps businesses improve accuracy, prevent loss and optimize inventory levels with its ERP inventory management software.
• This manual, hands-on process serves as an integral component of inventory management, offering an array of substantial benefits to businesses.

The continuous inventory method is an inventory management technique that strives to maintain an accurate count of all items in stock at all times. Continuous inventory is one of the physical inventory methods where all materials are counted at some month or point in the year. So, for example, a bicycle spare part manufacturing company can count some materials in May and some in September.

Unlike full inventory counts requiring store closures or overnight work, cycle counts can be conveniently performed during regular working hours. An inventory count, also known as stocktake, is the practice of counting stock on hand. It’s primarily a manual process, requiring your staff members to walk around the sales floor, stockroom or warehouse to complete. Lead by example and demonstrate to your staff the correct way to do a physical inventory count. Give them a sample of a completed form, then have them go over their initial try to ensure the form was filled out correctly. To prevent double-counting, mark the regions on the map that have been counted.

Jackie’s content provides practical, friendly guidance to navigate the ever-evolving digital commerce landscape. To learn more about how ShipBob can help you optimize your retail fulfillment process, contact our team by clicking the button below. Inventory scanners are wireless, which makes it easy to scan a product wherever it’s stowed using barcodes to identify each SKU type.

What are some common challenges or obstacles organizations face when conducting a physical inventory count?

This way, you can keep track of the flow of inventory, know when to reorder more, and make better predictions on future demand. “In terms of tracking inventory, we use ShipBob for everything — to be able to track each bottle of perfume, what we have left, and what we’ve shipped, while getting a lot more information on each order. Maintenance, repair, and operations (MRO) refers to the tools and equipment used for the maintenance, repair, and running of production required to manufacture finished goods. In addition, the results of the annual inventory can be used to inform critical financial decisions, such as whether or not to secure a loan or sign a new lease. Helps businesses to begin each year with a clean slate, ensuring the precision and responsibility of their inventory.

Using a comprehensive written policy and instructions decrease unknowns and streamline a physical inventory count. Some businesses do not have the staff to complete a full physical inventory. Keeping inventory levels updated helps to fill customer orders quickly, avoiding delays and stock shortages. Compiling a detailed inventory item list can ensure that nothing is missed during the counting process and minimize the chances of errors or omissions. If you run an e-commerce business, you’ll know that stocktake is just a small part of inventory management, and inventory is just one item on the long list of problems you have to tackle. If you’re new to inventory management, or are just getting started on stocktake for your store or warehouse, you’re at the right place.

Make sure you have either a fresh supply of batteries or have recharged rechargeable batteries for your scanners. A well-crafted business plan is essential for any small business, serving as a roadmap and guiding your business toward its goals. Taking inventory is best done by using a predetermined set of steps that your team can follow each time.

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