Physical Inventory - What To Watch Out For
By Bob Boyles, Principal
Smarter Distribution

Physical inventory is one of those things that comes around once a year and never seems to get the attention that it deserves from the distributor management staff. But a mismanaged physical inventory can be a horrible chore that the whole company suffers through and creates more problems than it solves. There several easy ideas to keep in mind that help you survive this task in one piece.

First, assign someone to manage the inventory that has time to do it right and the authority to do what must be done. Normally I see it being pushed off onto someone in the IT department or someone in the purchasing department. This may not be an entirely bad thing but that person must have the time to commit to this project.

Second, on of the most common mistakes that will doom any physical inventory is improper scheduling. I know the distributor is in for a long and tough inventory when I ask the date of physical inventory and the MIS manager leans over to his calendar and says "Looks like next week, better start thinking about that." You should begin planning for a physical inventory 2 to 3 months in advance depending upon your circumstances.

Third. The old saying is "Garbage In, Garbage Out". When it comes to physical inventory I can tell when I walk into a warehouse and look at the organization and cleanliness if that company is going to have a successful count or not. If your warehouse has been a mess all year long physical inventory will help you clean it up but it will not help you clean up all the mistakes that have been made that naturally go along with that lack of organization.

Fourth, understand what a physical inventory is as far as your accounting system goes. One of the objectives of a physical is to get the counts right in the computer. But the major objective is to balance the book value to the warehouse value. This means that anything that can affect the book value of inventory must be taken into account and cleaned up.

These are just some of the things that I look for when preparing for a physical inventory. A properly run physical inventory can save your distributorship a ton of trouble through out the following year.

About Bob Boyles and Smarter Distribution:

Bob Boyles started his strategic consulting business in 2001 and has focused on the change that technology is forcing in the supply chain and how independent distributors can not only respond to that change but also maximize the return they are seeing on their investment. Bob has spent a significant amount of time as an Installation Consultant for several of the big name software companies in the distribution market. Working with hundreds of distributors across the country on installing, upgrading and utilizing their software.  Bob also worked as Corporate Systems Manager for one of the largest electrical wholesalers in the country as that company moved from a completely manual operation to an on-line real-time system. 

Bob is a graduate of Appalachian State University (BS - 1981)and University of North Carolina at Greensboro Graduate School of Business (MBA - 1985).

© Copyright 2002, Robert S Boyles, Jr. All rights reserved. This article cannot be reprinted or reproduced in whole or in part, without the express written permission of Robert S Boyles, Jr.