Inventory Management
Tracking stock levels and locations.
Workflow
- 01Stock Monitoring
- 02Reorder Triggering
- 03Receiving Stock
- 04Inventory Auditing
Data in and out
- OUT Stock movements to General Ledger · continuousWithout it: Inventory value in the ledger stops matching the warehouse.
If you change this
It implies 2 topics across 2 modules, including Manufacturing which you might not expect.
See the path ahead →Why it matters
Inventory is the point where the physical world and the ledger are supposed to agree, and the place they most often do not. Every discrepancy is either a control failure or a process failure, and both cost money.
- It is a balance sheet number: Stock value flows straight into reported assets and cost of sales.
- It constrains the promise: Available-to-promise is only as good as stock on hand.
- It hides loss: Shrinkage, damage and obsolescence surface at count time unless something finds them sooner.
The workflow
- 01
Stock monitoring
On-hand, allocated and available tracked by location, continuously rather than periodically.
- 02
Reorder triggering
Replenishment raised against min/max, reorder point or planned demand.
- 03
Receiving stock
Goods receipted to location, with quantity and condition recorded.
- 04
Inventory auditing
Cycle counting by value and movement class, with variance investigated.
Cycle count instead of stocktaking. An annual count corrects the record once a year and tells you nothing about why it was wrong; cycle counting by ABC class finds the cause while the cause is still findable.
What you need in place
- Location-level tracking: Knowing you have twelve is useless if nobody can find them.
- Valuation method decided and consistent: Standard, average or FIFO, with the accounting consequence understood.
- Cycle counting programme: Frequency by value and movement, not uniform.
- Variance investigation: With a threshold and an owner, not just an adjustment.
- Obsolescence policy: Aged stock provisioned on a rule rather than at year-end.
- Segregation of duties: The person who counts should not be the person who adjusts.
Questions to ask
01Accuracy
What is our measured count accuracy?
Measured, not believed.
02Locations
Do we track location, or only quantity?
Quantity without location produces re-buying.
03Valuation
Which method, and does everyone know the consequence?
It changes reported margin period to period.
04Adjustments
Who can adjust stock, and who reviews it?
Unreviewed adjustment is how shrinkage disappears.
05Obsolescence
How is aged stock identified and provisioned?
If only at year-end, the provision is always a surprise.
06Consignment
Do we hold stock we do not own, or vice versa?
It is accounted for differently and usually handled the same.
Metrics and KPIs to track
Count accuracy
Cycle count variance, by value and by line.
Stock turns
By category and location.
Days of inventory
Against target, trended.
Obsolete and slow-moving
Value and share of total.
Stockout frequency
Demand unmet from available stock.
Adjustment value
Net and absolute, by reason code.
Alongside this