5 Reasons Why It’s Better to Handle Your In-Store Inventory Counts “In House”
Bringing in a third-party to complete this tedious and time-consuming task may have been best in the past, but outsourcing physical inventory event is on its way out the door.
How many times have you thought – in hindsight – that it would have been easier/faster/better to just complete a certain task yourself versus delegating it to someone else? If you’re like me, probably quite a few.
As busyness has crept into every aspect of our lives – and our businesses – outsourcing certain tasks that we deem to be too laborious, expensive or time-consuming has become more appealing. Outsourcing allows us to find more “balance” and “prioritize,” we’re told. By shifting the burden of responsibility to others, you should be able to free up your time (or your team’s time) and resources to focus on more strategic priorities.
However, as you may have realized at some point in your life, delegating a job to others can end up demanding just as much of your time and resources as if you had just done it yourself. Sometimes even more. Why? Because you still have to manage the service provider – and they aren’t always as self-sufficient or meticulous as you might like.
Case in point: outsourcing the arduous process of physical inventory counts in retail stores.
For decades, retailers have tapped third parties to manage their large-scale stock-taking events as a matter of (perceived) convenience. It is important for store associates to remain focused on customer service at all times, and it doesn’t make sense to hire additional employees solely to conduct these annual wall-to-wall inventory counts. They occur too infrequently, and the work that goes into hiring and training staff for a one-off job isn’t deemed to be worth the money or effort. So, outsourcing every aspect of this tedious and time-consuming inventory verification process to a third-party service provider has long been seen as the most efficient solution by retailers.
Mobility Gives Rise to Better Physical Inventory Management Options
Based on the calls we’re receiving from our retail clients, the age-old practice of outsourcing physical inventory counts is losing favor to self-directed inventory programs that enable in-house staff to take stock of on-hand inventory using mobile scanners. And it makes perfect sense!
Retailers bank on physical inventory counts conducted by people to:
- Ensure the right products are at the right store at the right time – and that they’re priced right to move. Routine inventory counts help retailers understand supply and demand (i.e. market performance) for currently-stocked merchandise and financially adjust or reset the value of inventory, their largest revenue-generating assets.
- Improve loss prevention and customer retention efforts. Validating and properly managing the level of on-hand inventory is critical to retailers’ ability to fulfill customer orders and prevent walk-outs due to out-of-stocks. Physical inventory counts help reconcile the digitally-captured data appearing in back-office inventory management systems with what’s actually in the store and on the shelves. Though we hope that all inventory-related data captures are clean, input errors can still occur depending on how inventory is tracked across each supply chain touchpoint. So can shrink. Either way, the retailer can stay appraised of inventory-related asset or customer losses and take swift action to mitigate further issues.
There’s a caveat, though.
In order for these physical inventory events to really pay off, they must be cost efficient and convenient. Retailers must be able to retain complete control over the inventory process. The data captured during these events must be deemed credible since it directly influences critical inventory decisions – and it must be instantly accessible for analysis and application during the event. Along those lines, a certain level of continuity must be maintained between front-of-house and back-of-house inventory management systems, and retailer must be able to maintain continuity in the occurrence of inventory events. A one-time count can only help so much. Retailers must be able to conduct cycle counts between their bi-annual or annual inventory events to gauge whether or not their previously-implemented inventory strategies are effective and to flag any new pricing, stocking or shrink issues that may be emerging.
In fact, it is for these five reasons – or should I say requirements – that it no longer makes sense to hand over such an important responsibility to a third-party who doesn’t have the same accountability as an employee – or the same expert knowledge of your inventory as your store associates.
Your own employees are accustomed to using mobile devices with built-in barcode scanners every day to scan inventory during restocks or merchandise look-ups for customers. They are more than capable of performing your physical inventory counts, presuming they have access to a self-directed inventory solution that can guide them to the merchandise. Today’s mobile-enabled self-directed inventory programs can then automatically aggregate and analyze the on-hand data for you on the back-end, instantly flagging inventory variances. In fact, mobility is the reason why self-directed inventory programs have become the only truly actionable way to manage on-hand inventory with nearly 100 percent accuracy.
More Than Reducing Miscounts and Missed Deadlines, Self-Directed Inventory Counts Conducted by Store Associates Increases Accountability, Accessibility (to Data) and the Ability to Take Real-Time Action
When you outsource your counts, you assume that the inventory service provider will dispatch the right number of qualified workers to your location at the right time; that all these workers will all show up – and finish – the job on time; and that they will count – and document those counts – absolutely perfectly every time (or at least care enough to try). You also expect to receive a full and accurate inventory report in a timely fashion. Any delay in completing or reporting the count, or any error in the count, can be detrimental. Critical business decisions are based primarily on the data generated during these inventory events.
The problem is that you just don’t know if any of this is actually going to happen until it does – or doesn’t.
Third-party inventory services have been struggling with labor shortages lately and there tends to be accountability issues with any outsourced service, both of which can be disruptive to your operations. They may not be able to support as many inventory events as you would like or on the cadence that you require due to limited resource availability. Or, you might be told that 10 workers will come in and complete the count in six hours, but only half of them will actually show up. That means the inventory event may run for 12 hours instead of the planned six, which could potentially prevent your store from opening for business on time. Either way, it increases your labor costs. Alternatively, the service provider may have to come back another day to complete the count…in a month from now when labor is available again.
Even if all of the workers do show up on time, you will likely have limited visibility into the progress they’re making while they’re there. So, you still don’t know if they’ll finish on time until they do (or don’t.)
Then you may have to wait several more days before the data is fully aggregated and analyzed in the service provider’s inventory management system and shared with you, leaving you with a limited ability to take corrective action should a discrepancy arise between the presumed on-hand inventory levels reported by your back-office system and the actual on-hand inventory reported by the physical counters. You won’t even know about the issue until after those people are long gone, much less be able to determine whether the discrepancy is due to a miscount, misplaced inventory or shrinkage. That leaves you with a few, less-than-ideal options: recall the inventory service provider to recount (on their schedule) or enlist your employees to conduct an audit (which pulls them away from their other priorities). Both are costly for various reasons.
Something else to think about: unless these outside inventory counters are self-sufficient enough to navigate their way around your store and systems on their own, you’ll end up having to assign employee chaperones to escort them every time they step foot in your store. That disrupts store operations and partially defeats the purpose of outsourcing in the first place.
In other words: it can be easy to miscalculate the “convenience” of outsourcing physical inventory services. Beyond the fact that costly challenges can present themselves when you don’t maintain full control over the quality or quantity of inventory counters, third-party inventory services tend to employ an expensive labor model and tack on several surcharges related to inventory management systems.
Though it may seem easier to just call someone else in to take care of your stock-taking requirements, you should strongly consider doing physical inventory events in-house. With the right self-directed program in place, and the right mobile scanning devices in hand, your in-store associates can complete all of the scans just as efficiently (if not more so) than a third party.
Not quite convinced yet?
Check back here on Your Edge next week as I go into more detail about how self-directed inventory programs can work in your favor. More importantly, I’ll explain how they help you:
- Regain control over your inventory process – and your inventory
- Help to ensure continuity between inventory systems and events
- Increase the credibility / integrity of your inventory data and, thus, on-hand inventory
- Reduce the cost of physical inventory events and inventory-related losses
- Execute a more convenient physical inventory process
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