For busy warehouse managers, the prospect of performing an inventory audit may be a daunting task that might inspire them to cut corners. Though it’s only natural for workers in this important position to desire to place their focus solely on day-to-day operations, neglecting the hard data can lead to preventable mistakes that might jeopardize the growth or even survival of the business.
Because we want you and your employees to walk away from every audit feeling determined, well-informed, and most importantly, energized, we’ve compiled a best practices list that is designed to help you take an in-depth look at your inventory in the most holistic manner possible. Download our helpful warehouse inventory audit checklist for an interactive outline of the essential steps in the inventory audit process. Here’s a preview of what your steps should look like:
- Define your objectives.
- Conduct warehouse inventory counts.
- Observe warehouse operations.
- Interview key warehouse employees.
- Synthesize inventory data.
- Evaluate the inventory audit results.
Define Your Inventory Audit Objectives
Even if a warehouse manager has performed countless of audits in their career, a good one will recognize that no two should be executed in exactly the same manner. This means that, before the audit is performed, the manager must be in contact with the powers that be to ensure that they develop their audit to include specific points that the company may be trying to improve on or build.
Every audit should include the basics, such as inventory counts and data analysis. But basics aside, there might be some instances in which the company is bracing for new safety regulations, for instance, which means the auditor must pay extra close attention to current safety protocols and how the new ones can be implemented as seamlessly as possible.
Conduct Warehouse Inventory Counts
Whether the business relies on a period or a perpetual inventory system, it’s important that it performs cross-checks of even the most technologically-advanced networks to ensure that all items are accounted for. This can either be done as full or partial inventory count depending on warehouse organization and the accuracy of past audits.
In terms of strategy, it’s key that the warehouse manager takes multiple factors into account, especially if they choose to do a partial count. For a more thorough and accurate audit, they must ensure that they have taken into consideration any major shifts in inventory due to sales, holiday schedules, or liquidations.
For example, auditors often test slow-moving inventory to apply the lower of cost or market rule – a generally accepted accounting procedure that mandates that businesses record the cost of inventory as the lower of two figures: the actual original cost or the current market value. Likewise, auditors will typically test high-value items and error-prone items to confirm that records are accurate and consistent accounting methods are used. All of these variables should be noted so that there is no confusion or chance for discrepancy by the time the next audit rolls around.
Observe Warehouse Operations
Even the most attentive warehouse managers can lose touch with the daily comings and goings of their warehouse during particularly busy times. To amend this, it’s important that a careful and patient warehouse operations observation is made.
Of course, each observation will vary from one business to another as no two are exactly alike, but each one should include a full viewing of the fulfillment process, if there is one, and safety assessments to guarantee that everyone is staying out of harm’s way and is adhering to all regulatory measures.
In doing this, warehouse managers might also experience an “aha moment.” By sitting back and viewing the operations from an outside perspective, they will more readily see the often hidden weak spots that might be snagging efficiency. Of course, this leader must also take full notes during this process, which they will use in the last step of the audit process.
Interview Key Warehouse Employees
This can include everyone from the warehouse manager’s right-hand person all the way down to the temporary picker working the floor. No matter the position, open-minded, face-to-face conversations can be the most telling step of the audit, behind the analysis of hard data.
Here are some questions that should be covered in the interview process:
- Are you clear on all safety compliance policies? Do you feel consistently safe while on the job?
- Have you noticed any snags in the system that you feel might be slowing down workflow?
- Are you aware of any extra inventory or unused supplies that might not have been part of the initial count in this audit?
- How do you make notes of damaged or lost inventory in the inventory system? And, do you feel that you have enough access to the inventory system to do your job efficiently?
Synthesize Inventory Data
Depending on the abilities of the established inventory system, the warehouse manager’s duties can vary in this stage, from simply analyzing data collected through an automated system to manually inputting all counts into a customized spreadsheet.
Having said that, there is no excuse for rushing while the data is being synthesized. The manager must take care to ensure that all factors are observed, including theft, loss, count discrepancies, health and safety concerns, and employee interviews. After that, the findings can be organized into the inventory system so that the audit can be quickly and easily referenced for comparison in the future.
Evaluate the Inventory Audit Results
Now that the physical audit has been completed and all data results are inputted, it’s time to evaluate the findings. In this final phase, the following should be considered:
- Cost controls that might need modification
- Suggest improvements to established processes that could promote warehouse productivity
- Develop proposals for warehouse software and hardware updates
- Take time to analyze warehouse hours and make potential changes to shifts
At the end of the day, successful audits occur when meticulous warehouse managers do their part to keep strict daily records of activities. Doing this will make for a much more effective and comprehensive inventory audit that can be used as a template in the future. Looking for a list of actionable steps in the inventory audit process? Download our interactive warehouse inventory audit checklist.