Stocktake in Inventory Management

How often do you check your bank balance? Even if you spend the money yourself, you review it frequently to keep a record – so that you don’t spend it way too much and the capital is well managed- isn’t it?

Likewise for a product based business, stocktaking or stock count is the fundamental task that every seller does. Stock take is counting of “on-hand”  or physical inventory. Stocktaking lets a seller know whether he/she needs to raise a purchase order for a specific product or not. Eventually, the optimum level of inventory can be recognized by stocktake.

One cannot sustain in product-based business if proper inventory control is lacking. Stocktaking being a primary task of inventory control, allows inventory managers to identify the exact inventory count on hand.

Now let’s dig deeper and know when and how you should do stocktaking. You’ll also find a short case-study of a mineral water producer company and how essential stocktake is for their organization.

When and how frequently to stock take?

Stocktaking is usually done or preferred after business hours or during days off. Because it must be ensured that no stock is being sold or receipted while you or your team do the stock count or stock take.

Alternatively, businesses might require their staff to stay behind after hours to do a stock take. It is important to consider how frequently and how thoroughly you want to stock take to best manage your inventory.

If you Google about “how frequent to stock take” – it would show results like at least once a year. However, stock taking depends on how much control you want to have on your business. What does that mean? Let’s understand it by a practical example.

Say, a department of your business was not able to perform well and were running at a huge loss due to inappropriate inventory control procedures. Hence they were experiencing stock-outs, stock shrinkages, stock theft, and poor management techniques.

Now would you prefer finding out about all this year-end or month-end or weekly or daily? Once you are good enough to answer this you’ll be in a better position to determine how frequently you should do stocktaking.

With a manual counting, you won’t be able to find out errors if you had fixed a problem (as many other important tasks would overtake these type of things), but with same-day reports you can analyze the changes and find out whether the changes have worked the very same day or over a much shorter period, helping to revise issues much faster.

However, with a cost-effective and cloud-based inventory management system like Orderhive,  you can automate the task of stock take – at any given time, without closing your business.

Benefits of stocktaking

• Accurate tracking of inventory: Stocktaking allows you to keep an accurate track of the physical stock or on-hand inventory, what’s been sold, and what hasn’t. Tracking can be done via analyzing the physical stock to what the report says then finding any discrepancies.
• Easily recognize the errors in stocking: Know if there’s a significant miscalculation between what you think you should have and what you actually have. Your stocktake can highlight a number of problems including theft and shrinkage problems.
• Prevents overstocking: By stocktake, you’ll understand how much quantity to restock, therefore overstocking can be evaded.
• Keep a track of your inventory carrying costs and COGS: By stocktake eventually, you’ll know how much is it costing your business to hold an inventory. Stocktake also helps businesses find out if there is a need to produce more or less to keep up with expenses or maintain the same income stream.

Stocktake for Restaurants:

Unlike retail business, restaurants or food business has different frequency of performing stocktake. For some items (highly consumable food), it should be done daily, for others twice a week. At least, it needs to be completed before placing weekly orders.

Some restaurants even prefer stocktaking inventory after the restaurant has closed, or before it opens. It is highly recommended that restaurants should do stocktaking during business hours, as you cannot take accurate inventory while goods are being sold.

For stocktake in the restaurant business – make part of the practice ensuring that you follow First In First Out(FIFO rule). Older goods should be brought (rotated) to the front of shelves so they consumed or used first.

How to Stocktake?

In the era of technology and digitization, the best and most efficient way to stocktake is having a cost-effective and easy to use Orderhive’s inventory management software, that can provide same day reports, real-time syncing and just with one-click get the stocktake report.

Here are some other ways of stocktaking are:

• Periodic stocktaking – It is an inventory method of stocktaking which is periodically performed according to the frequency which is set prior to starting of stocktake such as “only at the end of the accounting term” and “once every 6 months”. In this, all the inventory of items including ones in warehouses and processes are checked.
• Cycle counting: In contrast to the periodic stocktaking, cycle counting is counting of the small amount of specific inventory on a specific day, without having to do an entire manual stocktake. Cycle counting is a sampling technique where the count of a certain number of products infers the count for the entire warehouse. It is one of the most used techniques of stocktaking.
• Spot checks: Another method is spot check which are scheduled (and sometimes random) manual checks on stock or cash in tills. They can allow you to make sure there are no contrarieties between what your inventory management software considers you should have and what is truly there. Spot checking is also good to do if you think theft or damage of goods are occurring.
• Barcode Scanner: If you use an inventory management system that supports stocktaking by barcode scanner can save you a great deal of time and money in all sorts of areas of your business.
• Mobile App: You can even download the app for your smartphone which lets you stocktake items to keep track based on their locations, SKU or any other references related to the stocktake count in hand.
• Group assign tasks vs single person task: If you’re a manager or operator of a huge warehouse, then you can assign a group of workers (operating in particular area of a warehouse) to do the stocktake process of their work area. Which may save an ample amount of time, in comparison with assigning a task to an individual person. Ex: You may assign a group for Product A stock count and other groups for Product B stock count.

Never Hurry up! during stocktaking. Take the time to check everything properly and accurately – including all your safety stock, cycle stock, and unfinished goods. Don’t just rely on what the printed labels say.

Measures to take after the stocktake

Well, now everything is in front of your eyes – clear and exact figures. You can evaluate how much it is all worth and analyze the result of your take. After that, it’s time to reorder or re-arrange the items that are near to running out of stock and items which are not selling.

Finally, it’s time to make sure that you get the maximum advantage from your stocktake, by analyzing its results and how it went. There are two areas to pay particular attention to:

1. Tips to improve your inventory management: As mentioned in the beginning that managing your inventory manually is an old-school method and isn’t cost-effective practice. Hence, implementing an inventory management system that not only does the stocktaking, but also automates every operation of inventory can enhance your business’s productivity.
2. Ideas to make the next stocktake run better: The next take is probably the last thing you’ll want to consider. But while the data from the last one is still fresh in mind, make sure to write down any concerns, improvements or sticking points so that every future count runs that little bit smoother.

Case-study of  Rwenzori beverages

Rwenzori beverages is producers of pure natural mineral water in East Africa the purposes of the study were, to establish the inventory management systems and techniques to establish the measure of success in an organization and the relationship between stock management and organizational success.

The findings reveal that there is formal stock management and several techniques are applied to manage stock which includes stocktaking and inventory level tracking. Here’s the screenshot of the table from the study which shows the responses from 28 respondent regarding stocktake.

From the study, it has been discovered that there are certain areas where stock is controlled and managed by skilled staff. At this point, all data relating to stock is entered in the computer. This data range from quantity, manufacturer, expiry date, date of manufacturer, and so on. As soon as the take is done, the software automatically updates its data accordingly.

I hope this article would have helped you understanding stocktake and ways of doing it effectively. Let me know if you have any questions related to this article via comments.