Back
Home / Blog & Media Center / Benefiting from stocktakes

Benefiting from stocktakes

Insofar as risk and operational pain are concerned, performing a stocktake rates very high on both counts.

Many organisations recognise that if they perform stocktakes badly, it will have significant impact on their general ledger, inventory, and warehouse management system.

There are two basic stocktake types:

    • A full stocktake: often referred to as a ‘stock count’, ‘physical inventory’, ‘wall-to-wall count’, and many other terms. It involves counting every item, in every location, in full, at the one time. Due to the disruption factor, a full stocktake is performed as rarely as possible, often only once a year.

 

  • A cyclic stocktake: regular counts (e.g. every week) of smaller manageable parts of a warehouse. You choose a range to count and incrementally work around a warehouse to complete a full cycle over a period of time. Once a full cycle is completed then a new cycle begins. The primary focus of a cyclic stocktake is the operational benefit that can be achieved, not the once a year corporate requirement to prove the balance sheet.

Full vs cyclic stocktakes, which is best?

Operationally, a full stocktake is of little benefit. It does not make any money, it does not make the stock more valuable, it costs money to perform, and it is disruptive to normal operation

So, why do it?

Usually, you do it because someone forces you to. The financial controller or auditors will want an organisation to prove that the value of stock in the balance sheet represents a true and fair picture of what exists. So, the objective is to confirm the actual stock holding for the balance sheet.

Many people believe that a full stock finds errors and ensures accuracy. Quite often it does not. A full stocktake can be just as likely to introduce errors as it is to correct them.

A cyclic stocktake on the other hand involves regular counts, so it can correct location errors constantly, rather than once a year. It highlights missing stock a lot sooner than an annual full stocktake. It allows warehouse managers to see operational problems quickly and react before they become large issues. Because they involve smaller counts they are easier to manage and less likely to disrupt normal operations. Since they are performed regularly, staff members are more familiar with the process and less likely to make mistakes.

Can a cyclic stocktake process replace a full stocktake?

If they are performed properly cyclic stocktakes are usually sufficient to prove a true and fair picture of the stock holding.

However, simply correcting the inventory balances is not good enough. The objectives of stock takes should include identifying the cause of the error and using this to strengthen the operational processes.

You Might Be Interested In:

You Might Be Interested In:

Distribution

7 Sep 2018

Distribution is one of the most critical aspects of customer experience, because it’s the moment that your customer receives what…

Distribution

7 Sep 2018

Distribution is one of the most critical aspects of customer experience, because it’s the moment that your customer receives what…

Next Post:

Next Post:

The best business database

20 Feb 2012

As small and medium-sized enterprises (SME) incorporate complex IT systems into their infrastructure, they need to invest in a scalable…

The best business database

20 Feb 2012

As small and medium-sized enterprises (SME) incorporate complex IT systems into their infrastructure, they need to invest in a scalable…

Let’s stay connected

Be the first to receive our resources, including news about your industry.