As January approaches, many retail businesses start thinking about completing their physical inventory. The benefits of completing such a process are well documented and include everything from documenting your shortage to resetting your on-hand counts. With the benefits known, the question is not whether you should complete an inventory. Instead, it is the best way to complete it.
When it comes to taking inventory, a small businesses really has three choices—you can hire someone to count your merchandise for you, you can complete a self-scan inventory, or you can use the paper and pencil approach.
Hiring a service to count your merchandise. This is typically the most expensive option. Normally the cost is relative to how many units you expect to count as well as how accurate you require the count to be. A formal contract is typically used, and many aspects of the agreement are up for discussion. To reduce costs, consider taking your inventory when your stock levels are lowest and negotiate an acceptable error rate. With the elevated price of hiring a service, you get some important benefits. First, you get all the equipment and software necessary to complete the count. This normally includes software to connect to your current system as well as exception reporting for count accuracy. You also get a team of employees who are experienced and count merchandise for a living. This type of count works great for large inventory quantities, as you can work with the vendor to provide enough resources to complete it within an appropriate amount of time.
Completing a self-scan physical inventory. This is generally a less expensive option than hiring an outside company to complete the scanning, but it can include many of the benefits. This type of inventory utilizes the equipment and software from a second party, but all the actual work is completed by your own employees. It allows you to take advantage of the technology to make the process easier without the full cost of an outsourced inventory. This option works well if you have complicated products that are difficult to tell apart. Since the workforce using the equipment comes from actual employees of your company, they fully understand what they are counting and can separate items accordingly. They also have a vested interest in the outcome of the count; therefore, they are focused on completing an accurate count.
Using the “paper and pencil” method. This is often viewed as the least expensive method for completing an inventory, but it is also the most labor intensive. This type of count works very well for smaller quantity inventories as anything too large would become a challenge to reconcile. The process also does not require any high-tech equipment or expensive software. The great news is that technology has come a long way and having to use a piece of paper and a pencil is not always necessary. Today, several apps are available, many of which are free, that can read a UPC bar code, track each item scanned, and load the results directly into a spreadsheet. Operating your own inventory allows you more control over the process and lets you work at your own pace. You will not be bound by any contracts or profit objectives from a third-party vendor. As with the self-scan option, you can select the employees from your team who best fit the task of counting merchandise. Although this type of process does not normally have any automated exception reporting, you can still review any high variances and research to resolve.