Tips for Improved Inventory Control: Part 3/8

3. Hold staff accountable for sloppy and inaccurate transactions.  Many current accounting packages provide a wealth of history and audit reports that show, among other things, the username for each transaction. Make it a firm policy that the user named in the report absorbs full responsibility for erroneous transactions – even if somebody else used his/her login. This simple policy will be effective in teaching people to keep their passwords secret and to logout of the system when they go to lunch, etc.

4. Instruct all order-entry staff to stop an entry of an order whenever a line item appears with a zero cost. Better yet, have them stop order entry if a cost exceeds a price on a line item. Review and correct your costing/pricing immediately.

5. For order-picking operations, require that one person picks an order and a second person packs the order. Having two sets of eyes look over each order will dramatically reduce the number of picking errors incurred. Insist that both picker and packer initial your copy of the picking ticket. Assign bottom-line responsibility for order accuracy to the packer – the last set of eyes to see both the picking ticket and the merchandise!

6. Review backorder reports daily. Most current versions of business software provide backorder management reports and fulfillment tools that can be used aggressively and routinely to provide a failsafe method for the timely shipping of backordered items to customers.

7. Review the setup of items that you drop-ship on a regular basis to make sure that G/L distributions will be correct. Typically, most current software will provide for the creation of a drop-ship inventory location; thereby facilitating management of your drop-ships and physical counts. Typically, most software makes provisions to allow drop-ship P/Os to be “received” even though the merchandise never hits your warehouses. You can then voucher invoices against the received P/O. Recently, there have been further innovations in drop-ship functionality such as “pushing” a customer sales order directly through as a P/O to your supplier. If drop-ship order fulfillment is a substantial aspect of your distribution strategy, then you should research some of the newest wrinkles in drop-ship functionality.

8. Does your present software provide for separate inventory cost methodology for stock valuation/transactions versus usage for P/O issuance versus the cost method used for price calculations (for cost-based pricing models)? Understand the differences between the cost method applications. Be cognizant of the pros and cons of each method with respect to reconciling your G/L inventory accounts to the subsidiary inventory valuations. For example, if you use last cost inventory valuation, your I/M valuation will virtually never equal your corresponding G/L inventory accounts at month end… but it still may make sense to employ last cost!