Next time you meet someone in manufacturing ask them about their job. Most of the time, they will smile and their eyes will light up as they tell you about the sounds, smells, precision and skill it takes to make a part. Then ask them what they dread about their job. Most of them will smile and laugh and will give you an eye roll as they say, “doing physical inventory.”
Physical inventory is the process a manufacturer goes through to count its entire inventory. Often, performing physical inventory is a requirement to achieve certain certifications or a financial or tax requirement. On many occasions, manufacturers that make parts for the government or defense contractors are required to perform physical inventory regularly.
“We are regularly audited on our inventory control processes to ensure everything is accounted for,” says Mary Bly, inventory accountant at Matech Solutions. “Without Global Shop Solutions, that process would be next to impossible.”
Physical inventory can often be referred to as the necessary evil of manufacturing. It is critical to perform it accurately in order to be profitable and deliver quality parts on time, every time. Over the years, Global Shop solutions has developed 10 steps to take to perform perfect physical inventory.
1. Prepare and plan ahead
Taking physical inventory can be an unwelcoming and daunting task requiring you to be prepared with adequate resources. Any lack of preparation or employee support may lead to a failed inventory count. An “all hands on deck” approach ensures you have enough people available to help.
It is much easier and a bigger morale booster to send someone home than it is to call someone in last minute. Set expectations early and discourage employees from taking personal time off on the day of the “big count.” Small morale and team building boosters like ordering in lunch help to keep the team focused on the task at hand. Create “inventory teams” and pair two employees per team.
Pairing up allows one person to scan and input the counts as the second person actually counts the parts. Creating two-person teams is also a way to build comradery between employees, especially those that may not have the opportunity to spend time together.
2. Identify inventory
Keeping inventory labeled is an important step in controlling your inventory between performing physical inventories. It is important that the practice of labeling your inventory is not just done when you prepare for and take physical inventory. Labeling ensures that employees can identify the correct inventory when consuming it into jobs or shipping to customers.
Barcode labeling helps make the job manageable. Global Shop Solutions has a built-in integration with Codesoft barcode labels that can be printed as transactions are being performed in the system as well as a partnership with EMS Barcode for hardware. System-generated inventory labels eliminate hard-to-read, handwritten labels. The barcodes enhance the labeling experience by allowing mobile transactions to be performed in real time on the shop floor or the warehouse where inventory is stocked.
3. Freeze transactions, inventory movement
Taking physical inventory is a challenging process in itself, but chasing a moving target must be avoided. Inventory movements need to be frozen during the counting process with no exceptions.
4. Minimize downtime
Long gone are the days where you had to print a count sheet and write down the counts, collect inventory tags and input the counts into the system. When it comes to taking physical inventory with Global Shop Solutions ERP software, count teams can quickly and easily record their counts wirelessly by scanning barcode labels and recording electronic counts directly into the Global Shop Solutions physical inventory system through GS Mobile software. This process can drastically reduce the physical inventory count time from start to finish by at least half, as well as improve the accuracy of the counting process.
According to Marie Yates, IT manager at MUM Industries, “We saved thousands of dollars and hundreds of hours of labor time with Global Shop Solutions by not having to shut down for two whole weeks while we count inventory.”
5. Accuracy is important
What is the point of performing physical inventory if the counts are not correct or cannot be trusted? Inventory accuracy starts with ensuring physical counts are taken with confidence. Barcode labels and scanning barcodes help ensure the right counts are recorded for the right part. Similar parts are correctly identified and recorded in the count.
6. Monitor counts
“Inspect what you expect.” The management team should be available to help with any inquiries on the floor as they arise. They should also make sure the integrity of the counts is maintained. It does not hurt to perform some spot checks on how the teams are counting to ensure accuracy. When it comes to company audits, spot checks are normal. Prepare yourselves by performing this activity.
7. Identify what has been counted
Implement a method to mark off or flag an area that has been counted. There is no right or wrong way of doing this. For example, some companies tape off sections with brightly colored tape. With GS Mobile, you can print inventory labels as you scan and count inventory. With a handheld scanner and wireless hip printer, counting and tagging counts is simplified and made efficient.
8. Review count variances
Using the GS Mobile physical inventory process, inventory count variances can be reviewed from an inventory variance report generated from the system. This report can be printed at any time during the count. Material variances should be identified and discrepancies double checked.
9. Commit counts
Once the count is verified and confirmed accurate, commit the count changes to the inventory system.
10. Open for business
Now everyone can get back to making and shipping parts with accurate inventory numbers. With the GS Mobile physical inventory process and Codesoft barcode inventory labels, taking physical inventory does not have to be a painful process but a welcome bi-annual or annual event.
