Physical Inventory – The Count that Counts

Retail security experts have long said there are three sources why inventory disappears … external theft, internal theft, and errors. Physical inventories not only help a retailer confirm what’s on hand and in what quantities, it also helps get a glimpse on curious and problematic aspects of operations.

Last Sunday we conducted an early physical inventory so we could adopt a mid-year schedule. In Florida, summer has been a bit quieter than our first winter months. The last thing we need to do is celebrate the holiday shopping season and then count everything in the store on December 31st. So, we decided to get it done now, while inventory is lower and before we ramp up for the holidays.

Our retail space is approximately 2,400 square feet and we had eight of us working from 10 am until 6:30 pm to scan the inventory. Our computer systems vendor provided the scanners and instructions. We spent the week before getting organized and receiving everything before Sunday arrived.

With today’s technology, you can easily conduct your own physical inventory with your own staff. There are third party services you can employ, but it’s really not necessary to go outside since you’ll add extra time meeting them to explain your business.

On Monday morning, we began with an inventory that was correct, clear of receiving errors and corrected for “shrink”. During an author event earlier in the year, we knew a stack of books had disappeared, but we had no idea what else might have been stolen. The sobering fact is that even in small and safe communities, theft happens. Theft rings will even travel great distances for an opportunity.

The benefits of doing a physical inventory are many. We learn:

  • To correct item classification errors (books tagged for wrong sections) and ensure each new item brought into inventory has key fields properly coded
  • What processes need to be fine-tuned to ensure every item is costed properly
  • How to do mini audits throughout the year to keep the inventory accurate
  • What kinds of merchandise are most vulnerable for theft
  • What kinds of merchandise are most vulnerable for damage

Most importantly, we have a renewed commitment to shelving merchandise accurately and a new faith in our on-hand quantities … which is something we all appreciate each time we look for an item on the sales floor our system reports we have on hand.

When the cost of  inventory is the greatest cost of a bookstore, this annual count counts and is an essential step in managing the business.

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