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For businesses that sell physical products, it’s crucial to keep a close check on stock levels and ensure accurate physical counts.
To that end, they often conduct stocktakes. Although a stocktake can be tedious and mundane, it’s still one of the most popular inventory audit methods used today.
In this guide, we’ll cover what a stocktake is, why it’s important, how to conduct one, and how they benefit your business.
What is a stocktake?
Also called stock counting, stocktake is the process of physically checking, calculating, and recording the entire inventory you have on hand. This involves identifying all your units of on-hand inventory, manually counting it, and logging an accurate record of it.
Ecommerce businesses will typically compare this physical count against the data in their inventory management system to ensure that both are accurate.
Why are stocktakes important?
Although the stocktaking process is often labourious and time-consuming, there are a couple reasons why it has been many merchants’ preferred auditing method for many years.
First, it’s a highly reliable method of managing your physical inventory. The process gives you an accurate, detailed understanding of how much stock your business has on-hand, which can help you make informed decisions about purchasing, production, and sales.
This also means you’ll be able to figure out how much inventory you need and when to replenish it to meet consumer demand.
Second, stocktaking is the most effective way to detect any inventory discrepancies. Once you know there’s an issue, you can identify the source and come up with a solution before it becomes an expensive problem.
In this way, stocktakes regularly prevent issues such as theft, obsoletion, and shrinkage, which could be the source of a major loss for your business.
Benefits of a stocktake
When businesses perform stocktakes regularly, there are a number of ways they can benefit from it. Here are some of the main benefits of conducting stocktakes.
Understand stock levels
Stocktakes help you understand how much stock you have available.
By physically counting your on-hand inventory units, you can accurately assess exactly how much inventory is left, and whether you have sufficient safety stock to tide you over in case of increased demand.
With this information, you can make more informed decisions regarding production and purchases. Stocktake results give you a sense of which SKUs to reorder, in what quantities (to avoid overstocking or understocking), and when to order them.
Assess inventory tracking
Most businesses are already keeping track of their inventory with an inventory management system ( or IMS).
However, these systems alone aren’t enough to give you a complete and accurate picture of your inventory status. Even the best IMS can’t physically count your inventory for you — nor can it correct miscounts and mistakes (garbage in, garbage out).
A stocktake gives you the perfect opportunity to assess the accuracy of your inventory tracking system, and identify issues that the system missed. This will allow you to make necessary adjustments and corrections before it becomes too complicated and too expensive to fix.
You can compare the data from your inventory management system with the data from your stocktake to look for any mismatches and discrepancies.
For example, a manual stock count may reveal issues related to inventory damages and missing orders, even though your software doesn’t show those details.
This is also the perfect time to see whether you’re tracking your inventory effectively enough, or if you need to improve your inventory control or switch to a different IMS.
“We have a Shopify store but do not use Shopify to track inventory. In terms of tracking inventory, we use ShipBob for everything — to be able to track each bottle of perfume, what we have left, and what we’ve shipped, while getting a lot more information on each order.
The analytics are super helpful. We download Excel files from the ShipBob dashboard all the time and use them to analyse everything from cancellations, to examining order weights, to checking on whether ShipBob is shipping orders on time.
Even the way their warehouse receiving orders (WROs) work for sending inventory is very straightforward.”
Ines Guien, Vice President of Operations at Dossier
Identify low inventory levels
Stockouts damage the customer experience, so ecommerce businesses need to maintain optimal inventory levels to ensure that they don’t suddenly run out of stock.
Regularly performing stocktakes helps you identify low inventory levels before they become a problem. This way you can replenish your stock on time without having to store too much inventory at a time, and maintain optimal inventory levels to meet consumer demand without racking up costs or deadstock.
Prevent stock theft and “shrinkage”
If you’re depending solely on your IMS to track your inventory levels, you may not be able to catch inventory shrinkage. As a result, your actual inventory count will no longer match the numbers in your records.
Whether it’s due to employee theft, shipping damage, unscrupulous suppliers, or a simple case of human error, these discrepancies can cause significant issues in your purchase planning — and make it harder to properly account for losses.
By conducting stocktakes at regular intervals, you can quickly identify any instances of shrinkage and get to the root of the problem as soon as possible. This will allow you to prevent any further issues, and ensure that your inventory records are as accurate as possible.
Prioritize fast-moving stock over slow movers
With a regular stocktake, you can identify which SKUs have the highest inventory turnover ratios, and which SKUs are moving more slowly. That inventory data enables you to focus on purchasing stock that you can quickly sell instead of ones that will sit around in your warehouse, gathering dust and racking up storage costs.
How to perform a stocktake in 2023
Clearly, regular stocktakes are a key part of running a profitable ecommerce business — so how do you conduct one? Follow these steps and tips below to plan your next stocktake.
1. Set aside time and minimise distractions
Depending on the size of your operations, it could take a couple of days to complete a physical count. Plan your stocktake at a time that doesn’t clash with or disrupt your regular business operations, and when you know you won’t be rushed, and when you can concentrate with minimal distractions.
Start by estimating how much time it would take to complete. Then pick a date and time, ideally during a slow sales cycle, to perform your stocktake. Consider doing it on your slowest days or even outside of your regular business hours to avoid unnecessary distractions and disrupting your operations.
To further minimise distractions, set a cutoff time for inventory movement. Establishing a timeframe for when no additional inventory should enter the warehouse from your receiving area and for when picking activities will halt ensures that there are no other activities taking place during your count that could cause confusion.
2. Locate all of your stock
Next, it’s time to identify all of the stock that should be a part of the stocktake.
Only count inventory that hasn’t been sold yet, but is already included in your inventory records. Do not count:
- Inventory that’s still in your warehouse, but has already been purchased by your customers.
- Inventory that’s been received but hasn’t been recorded.
Make sure to clearly and properly categorize each SKU and unit, whether that’s through a detailed list of physically sorting and relocating stock items.
3. Tidy and clean stock rooms, equipment, and inventory
If you try to count inventory with boxes scattered everywhere, there’s a good chance you’ll miss inventory, lose it, or double-count inventory — all of which can lead to inaccurate results.
So before you start your count, make sure your stock room is clean and organised so you can easily keep track of everything that’s been counted and everything that’s yet to be counted.
Start by tidying up your stock rooms and removing any waste or garbage that could affect your count. Old boxes and other excess materials must be discarded so the counting area is as clean as possible. Similarly, damaged inventory should also be set aside and clearly labelled so they’re separately accounted for.
Then, ensure that your stock rooms are properly organised to streamline counting. This would involve clearing space and assigning areas to separate inventory that’s already been counted, and labelling your packages and shelves appropriately.
4. Ensure you have all the tools you need
The final step before beginning your count is to gather all the tools needed to complete your stocktake. You will need:
- A detailed stock sheets that contains:
- Inventory descriptions
- Universal product codes (UPCs)
- Handheld barcode scanners
Depending on whether you use a cloud-based inventory management system, you may also need appropriate mobile devices to assist with your count.
5. Calculate; don’t estimate
It can be tempting to estimate quantities in a stocktake — especially if you have a lot of inventory to get through. However, the only way to ensure that your physical inventory count is accurate is to go unit by unit, and actually record every single item in your warehouse.
Rather than guessing how many units are stored in a box, or simply relying on what the box’s label says, calculate your inventory levels based on what’s really on the shelf or inside the packages.
This process will probably take up the bulk of the time allotted for a stocktake Once you’re finished, compare the figures against the numbers recorded in your system to assess accuracy.
6. Recount (if necessary) and update stock levels
If your physical count and your inventory management system’s records don’t match, you might want to consider doing a recount.
This might occur if certain items were counted multiple times, if you missed a box or two, if products were labelled incorrectly, or if units of one SKU were stored in multiple locations.
Once you’ve ensured that your count is correct, make sure to update the stock levels in your system if necessary.
Stocktaking is only part of the bigger inventory picture
As important as stocktakes are, they are only a small part of successfully managing your ecommerce business’s inventory. Inventory management as a whole must be functioning optimally for your business to reap the benefits of stocktakes.
To optimise inventory management overall, technology designed exclusively for stocktaking won’t be enough. Rather, ecommerce businesses need software that will enable efficiency and accuracy in all inventory-related processes — including receiving, storage, order management, and fulfilment.
With greater visibility and control across the board, business owners will be able to better manage their stock and maintain a seamless inventory flow. This will result in more accurate and efficient stocktakes that provide the insights needed to make informed decisions throughout a business’s supply chain.
Optimise your inventory management with ShipBob
If you’re tired of stocktakes, partnering with an expert 3PL like ShipBob can help — plus take a lot more inventory management tasks off your plate.
When you store inventory in one of ShipBob’s global fulfilment centres, ShipBob’s fulfilment experts handle receiving, stowing, picking, and packing processes for you.
Instead of sorting through a sea of boxes in your garage or spare room, you can manage your inventory in real-time through your dashboard and use key analytics to time replenishment, identify opportunities for improvement, forecast inventory demand, and gain new insights.
“After switching to ShipBob, we instantly had much more transparency. Unlike our last 3PL, ShipBob has integrity of information and end-to-end order tracking, from receiving to fulfilment to shipping. Now every single day when I check our dashboard, I know exactly what’s happening with our orders.”
Maria Osorio, Logistics and Operations Director at Oxford Healthspan
Struggling with inventory, but don’t want to outsource? ShipBob’s Merchant Plus solution lets you implement our proprietary WMS in your own warehouse, so you can achieve visibility into inventory movement while maintaining control.
To learn more about how ShipBob can help you manage your inventory and fulfilment, click the button below.
Below are answers to the most common questions about stocktakes.
What is the purpose of stocktake?
The purpose of a stocktake is to calculate how much physical inventory you have on hand, and how this compares to your inventory system records.
How does stocktaking relate to inventory management?
Stocktaking plays a crucial role in inventory management, in that it provides a business with accurate inventory level calculations and identifies discrepancies that could impact inventory control.
What are the benefits of stocktaking?
A stocktake helps you keep track of your inventory levels, identify fast- and slow-moving SKUs, check for discrepancies, and assess the accuracy of your inventory records.
How do I perform a stocktake?
There are several steps to performing a stocktake, including finding the right time, locating and organising your stockrooms, gathering tools, counting inventory units, and recounting if necessary.
Can I outsource my stocktake?
Yes, to some extent. Some ecommerce 3PL partners like ShipBob can assist you with stocktakes, as well as other inventory management processes like receiving, replenishment, and warehouse organisation.