What is Physical Inventory Counts? Tips and Best Practices
Maintaining accurate inventory is the backbone of any successful apparel business. Physical inventory counting helps ensure you always know what’s in stock, what’s selling, and what’s gathering dust. This process is crucial to making informed decisions that drive growth, improve cash flow, and satisfy your customers.
Here’s everything you need to know about physical inventory counting, its challenges, and how to get it right.
What is Physical Inventory Counting?
Physical inventory counting involves manually verifying the stock in your warehouse or store and comparing it to the numbers in your inventory management system. It’s a key process to ensure that your records match reality. For apparel businesses, where trends shift quickly, inventory accuracy can make or break your season.
Streamline your processes with a tailor-made inventory management solution.
Types of Physical Inventory
1. Raw Materials Inventory
These are the unprocessed materials used to create your products. For apparel brands, this might include fabrics, buttons, zippers, or thread.
Keeping track of raw materials ensures you’re prepared for production and can avoid delays.
2. Work-in-Progress (WIP) Inventory
This refers to items that are in the middle of the production process. For example, half-stitched garments or dyed but uncut fabrics.
Monitoring WIP helps identify bottlenecks and keeps production on schedule.
3. Finished Goods Inventory
These are the final products ready for sale, such as shirts, dresses, or shoes. This is the inventory you ship to retailers or sell directly to customers.
Accurate tracking ensures you meet customer demand without overproducing.
4. Safety Stock Inventory
This is the extra inventory kept on hand to avoid stockouts during sudden demand spikes or supply chain delays.
Safety stock protects you from disruptions and keeps your customers happy.
Methods for Physical Inventory Counts
1. Full Physical Inventory Count
This method involves counting every single item in your inventory at a specific time. It’s usually done annually or quarterly and provides a complete snapshot of your stock.
Best for:
- Annual financial audits.
- Businesses needing a comprehensive review of their inventory.
Pros:
- Gives a clear picture of total inventory.
Cons: - Time-consuming and may disrupt operations.
2. Cycle Counting
Cycle counting is a more frequent, less disruptive method. Instead of counting everything at once, you count a subset of your inventory regularly. You can prioritize high-value or fast-moving items.
Best for:
- Businesses seeking continuous accuracy.
- Reducing operational downtime.
Pros:
- Minimal disruption.
- Continuous tracking of inventory health.
Cons: - May not catch all discrepancies in low-priority areas.
The Key Benefits of Physical Inventory Counting
For any apparel brand, accurate inventory is more than just numbers—it’s the foundation of smooth operations, customer satisfaction, and profitability. Here’s a look at the top benefits of implementing regular physical inventory counting:
1. Improved Inventory Accuracy
Physical inventory counts help ensure that your records align with the actual stock in your warehouse. This means fewer discrepancies, better stock visibility, and fewer surprises.
Accurate inventory helps you avoid stockouts, overstocking, and lost sales opportunities.
2. Better Demand Forecasting
With accurate inventory data, you can predict future demand more effectively. Whether it’s planning for seasonal trends or forecasting product performance, your decisions will be data-driven.
Smarter forecasting helps optimize stock levels and reduce waste.
3. Enhanced Customer Satisfaction
When you know exactly what’s in stock, you can fulfill customer orders without delay. Accurate inventory counts ensure you meet demand, leading to fewer backorders and happier customers.
Happy customers mean repeat business and stronger brand loyalty.
4. Increased Operational Efficiency
Physical counts help identify slow-moving or obsolete inventory, allowing you to adjust purchasing and stocking strategies. It also makes your warehouse operations smoother by ensuring stock is where it’s supposed to be.
5. Financial Accuracy
Accurate inventory counts directly impact your financial reporting. They provide precise data for calculating the value of your stock, which is crucial for tax purposes and profitability analysis.
Best Practices for Physical Inventory Counting
1. Plan Ahead
Set a clear schedule for your inventory counts, whether it’s a full count or cycle counting. Notify your team in advance and ensure all necessary resources—like barcode scanners and counting sheets—are ready.
2. Organize Your Inventory
Before counting, tidy up your inventory. Group similar items together, label storage areas, and ensure everything is in its designated location. A well-organized warehouse makes the counting process faster and more accurate.
3. Implement Cycle Counting
Instead of counting everything at once, count a portion of your inventory regularly. Focus on high-value or fast-moving items more frequently. This ongoing process helps maintain accuracy without disrupting operations.
4. Reconcile Discrepancies Promptly
After completing your counts, compare the results with your system records. Investigate and resolve any discrepancies immediately to ensure accurate inventory data.
5. Conduct Post-Count Reviews
After the count, review the process with your team. Discuss what went well and identify areas for improvement to make the next count even smoother.
Keep a checklist of lessons learned to refine your approach over time.
Conclusion
Accurate inventory counting is a game-changer for apparel brands. By leveraging the right methods and tools, you can streamline your operations, boost efficiency, and ultimately, grow your bottom line. Make inventory counting a priority and see the difference it brings to your business.
Read Next
