Over the past several weeks, I have been working with two customers to improve the accuracy of their inventory. That is, to ensure that the on-hand quantities in their computer system agree with what is actually on the shelves in their warehouses. No matter how comprehensive or sophisticated your software, you cannot achieve effective inventory management unless your on-hand quantities are accurate. Over the next several months, we will look at “best practice” policies and procedures for maintaining an accurate inventory.

Many organizations fail to realize that a major key to inventory accuracy is proper receiving and put-away of products. Receiving personnel must ensure that you receive the correct quantities of the products you ordered and put them away in the right location. Not only will effective receiving help maintain accurate on-hand quantities, it will help to minimize the time and cost of filling orders.

Here are some keys to effective receiving:

• Assign your most technically competent people to receiving. Many items may be very similar in appearance. A knowledgeable employee knows how to properly differentiate between nearly identical products. They also have the expertise to put the inventory away to facilitate quick and accurate order fulfillment.

• Have receiving personnel verify stock receipts against a copy of the purchase or transfer order, not the vendor’s packing slip. This will confirm that the supplier actually shipped what you ordered.

• Establish “quarantine” bin locations to store inventory that fails inspection during the receiving process or is otherwise not suitable for resale or reuse. Receiving personnel should notify the appropriate buyer that damaged or incorrect goods have been received. Large labels with the received date should be affixed to all goods in the quarantine area to ensure that issues with these products are dealt with on a timely basis.

• Process all customer returns through the receiving department. Your receiving people are best equipped to inspect these products to verify that they are in resalable/reusable condition. Returns are either put away in the proper bin location or staged in a quarantine bin for return to the vendor.

• When putting away stock receipts, have receiving personnel verify the remaining quantity in the bin before adding the quantity received. Because there is usually a small quantity in stock at the time of stock receipt, this count can be quickly accomplished and will help ensure that the quantities in your computer system agree with what is actually in the warehouse.

“Best practice” receiving is essential for maintaining accurate on-hand quantities. Next month we will explore some simple procedures in the picking process that will help you achieve the goal of effective inventory management.