Tips for a Successful Annual Physical Inventory

physical inventory
physical inventory

Each year, typically between June and December, fleet management organizations perform a physical inventory of their stocked parts.

Many organizations today dread inventory day. During the day, there are many tasks to complete and many things that could go wrong. Before your next inventory count, follow these best practices:

Don’t Wait Until the Last Minute

The key to a successful fleet management inventory count is preparation. You should not wait until the last minute to prep for your annual inventory.

Conducting cycle counts throughout the year gives you confidence that your inventory counts are correct.

Set Your ABCs

Setting your parts ABC’s in your inventory management system is essential. This tactic lets you know what parts move the fastest and which sit on the shelf.

To determine your parts ABC’s, you must divide your parts into at least 3 groups: Group A, Group B and Group C.

Parts in Group A make up 70-80% of your inventory and are the fastest moving parts. Parts in this group must be counted more often– at least once a month.

Parts in Group B make up about 10-20% of your inventory. These parts should be counted roughly once a quarter.

Parts in Group C make up the remaining 5-10% of your inventory and should be counted twice a year.

If necessary for your organization, you can include a fourth group, Group D. Group D includes the parts that are slow-movers, but are still essential to your operations. You should count parts in this group once a year.

physical inventory
Verify All Parts Have a Location

Before your inventory day, verify that all of the parts in your inventory have a location listed in your inventory management system. You should also ensure that these locations are correct.

If a part is kept in two locations, ensure that your inventory management system shows this. This step ensures inventory counters won’t run around trying to find a part or, even worse, marking an incorrect count because they cannot locate the part. Checking bin locations during cycle counts makes this task easier at the end of the year.

Before Completing Physical Inventory

On the day before the physical inventory, verify that all parts used and received during the day are issued and recovered properly.

If using a paper system for inventory counts, print out the inventory count sheets in advance. If using a computerized system, such as a tablet, run the inventory count in your inventory management system to ensure that it is available on the computer system.

If your organization has inventory personnel, organize them into pairs– one as a counter and the other as a recorder. If you have enough personnel, create a team specifically for recounting if the original counts are off. This allows the count teams to continue on other sections, thus keeping inventory counts moving.

If using a paper system, make sure you have the personnel to enter the counts in the inventory management system.

While Completing Physical Inventory

On the day of inventory, provide the teams with the count sheets or tablets/computers and specific instructions. Use your inventory staff as a resource for answers, not for count performance.

Once you complete the inventory count and enter the data into your inventory management system, you should have a way to analyze the data. You want to know your inventory’s net discrepancy as well as the value of those discrepancies. The report should also provide you with the percentage of discrepancies based on the overall inventory.

Fill out the form below to learn how fleet management software can help before, during, and after a physical inventory.
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