Warehouse Inventory Accuracy: Why It’s Important and How to Achieve It

December 5, 2023 by Amware Fulfillment

Inventory accuracy – the degree to which the goods you actually have in stock match the quantities in your order management system – is hugely important to your business, especially if you sell online.

Why? Because inaccurate counts can lead to back orders and stockouts. Those, in turn, cause shipping delays, which make for unhappy customers, bad reviews and lost sales.

To avoid this, some companies purposely overstock goods, which may make sense if the supply chain is unreliable. But this practice reduces margins by tying up cash that could have been invested in new products, technology or marketing campaigns.

The goal is to hit that ‘sweet spot’ to ensure that you have what you need to meet your customers’ demands without overspending on excess inventory and associated storage costs. Good inventory management will help you get there, and good inventory management starts with inventory accuracy.


Manage Your Inventory Well to Avoid Lost Sales

warehouse-inventory-accuracyLost sales are a primary downside of poor inventory accuracy. It happens in a couple of ways.

The first is stockouts. 70% of online shoppers would buy at a competitor site rather than return to the site with the out-of-stock message.

Another way poor inventory accuracy leads to lost sales is picking inaccuracy. When items are not where the WMS system says they are, pickers can grab the wrong items. If the mistake isn’t caught, an incorrect order is shipped and you end up with a very angry customer whose unlikely to buy from you again.


How to Get on the Right Inventory Track

Good warehouse inventory accuracy starts with sound receiving practices – the process by which a company’s goods physically enter a warehouse and are logged into the warehouse management system (WMS).

A good benchmark for inventory accuracy is 99.5%. To meet that standard, start with good receiving practices, which should include the steps below.

  • Compare each shipment against the items listed on its advance shipping notice to verify that you received the items you ordered in the right quantities. If there are overages or shortages, notify your vendor immediately.
  • Make sure all items received are in acceptable condition. Place damaged goods in a quarantine area to prevent them from inadvertently being made available for sale.
  • Use barcode scanning to facilitate faster and more accurate receiving into a WMS. Scanning is faster and more accurate than manual entry, allowing stock levels to be reliably updated in real time and reducing dock-to-stock time.
  • Once all receivables are unloaded, inspected and scanned, organize and store new inventory in the warehouse. 

While effective receiving helps ensure that inventory is properly introduced into the warehouse, discrepancies can occur if stock is misplaced during putaway. It’s a good idea to periodically reconcile the levels shown in your system by counting the actual physical inventory in your warehouse bays.

Some companies may need to perform annual reconciliations of inventory as part of their financial accounting practices, shutting down their businesses until the process is complete. But ecommerce companies can’t afford to close their digital doors. The solution? Cycle counting.

Cycle counting means periodically verifying pre-selected portions of inventory at regular intervals (cycles). It’s an efficient and cost-effective way to ensure the ongoing accuracy of your inventory.

How often should you do cycle counts? That depends on how many SKUs you have, as well as your inventory turnover rate. For some items, once a year may be enough. For inventory with high turnover rates, you'll want to perform counts much more often.


Can Warehouse Drones Replace Cycle Counting?

Throwing more people at the challenge of verifying inventory counts isn’t the answer because, with human workers, there is always human error. Warehouse inventory drones provide a viable alternative.

Drones relieve warehouse associates of the mind-numbing task of manually counting inventory, while also boosting accuracy 20-30%. A drone can fly down an aisle taking pictures of each location and determining a case count based on what it sees. The drone also scans bar codes, compares this data to what’s in the WMS, and reports on the discrepancies.

Amware using drones a several facilities. Aside from the inventory accuracy improvement, another prime benefit of inventory drones is better labor utilization. For cycle counting, instead of looking at 2,000 locations, the team involved may only need to look at 70 locations that are flagged as having problems by the drones. It’s inventory management by exception.

Through a robots-as-a-service-model, drones are financially accessible to any size fulfillment operation. And ROI timeframes of just six to twelve months are common.


Need Help? Call in the Professionals

If you’re struggling to stay on top of inventory management and related fulfillment challenges, consider partnering with a fulfillment 3PL like Amware Fulfillment. We consistently maintain exceptional levels of inventory accuracy in a high-volume, high-turn fulfillment environment.

Mastering Multi-Channel Fulfillment  Multiple sales channels should not require redundant inventory, warehouses,  and information systems. Download our free white paper.


Filed Under: Fulfillment Operations