Stock discrepancy is one of the main issues faced by Business organizations and industries. They face various problems emerging due to changing businesses and market trends. Business technologies also influence it.
Companies face several issues, including stock discrepancies, timely delivery, managing customer expectations regarding delivery time, and overall supply chain management.
Taking control of the production process at each step is necessary to deal with stock differences and inventory-related concerns. It may include raw materials, processes involved, semi-finished goods, and the final goods ready to be delivered to the consumers.
Here is a detailed review that includes important details about:
- stock discrepancies,
- stock discrepancy report,
- their causes, how to manage them, and
- what procedures may be most suited to prevent discrepancies.
What Is Stock Discrepancy?
Stock discrepancy refers to the difference between physical stock or inventory and the current inventory in records or systems. Accurate inventory is important for a successful organization, including businesses of all sizes and reach.
It is particularly effective in domains like e-commerce, retail, manufacturing of diverse products, etc. It is ideal for companies that deal with:
- diverse SKUs (stock-keeping units),
- quick product transportation,
- last-moment deliveries, and
- ensuring error-free goods.
Such errors often increase the chance of inventory mismatches.
Small disparities can be easily addressed, unlike large-scale discrepancies that may result in widespread issues and long-term losses. Other damaging results include:
- stock buffering,
- loss of consumers,
- loss in sales,
- lack of consumer satisfaction, or return consumers.
Lastly, it is critical to discover the underlying reason for reducing stock errors, which might be more complex than correcting the issue. You can use a stock discrepancy report sample to understand stock errors better.
Main Causes of Inventory Discrepancy
Inventory discrepancy or stock concerns arise from various technical or human faults. Understanding the cause behind an underlying error can help organizations and businesses better understand inventory:
Here are some of the key causes of discrepancy of stock -
1. Inventory Shrinkage
Inventory shrinkage happens when the number of stock goods is less than the number of records in the inventory recorded-keeping system.
Some reasons for this include:
- supplier theft,
- fraud,
- human error,
- eliminating defective products, and
- inside administrative mistakes.
Investing in solid safety precautions and workforce instruction is necessary to reduce wastage.
2. Poor Returned Product Management
Return management greatly impacts a company's balance sheet and revenue. It ensures the correct handling of returned goods, reduces stock discrepancies, guarantees proper programming, avoids harm, and improves inventory precision.
Due to the different processing of returned products, proper focus on timely refund processes can be difficult. Training workers is critical to maintaining that the inventory system accurately tracks the delivery and condition of returned products.
3. Inadequate Location
Stock shortages can occur due to misplaced inventory, which can occur due to improper accounting or identification. To overcome this issue, employee education is important.
If stock locations remain a leading cause of confusion, consider improving structure and categorization and introducing improved stock management for location.
4. Not Using Adequate Technology
Outdated machinery is often at fault for the majority of stock disparities. A simple inventory control system may offer accurate, complete, and current stock insights.
Switching to a complete system that solves current and potential stock management needs could be the most cost-effective investment for organizations.
5. Lost Inventory
Modern storage facilities mark and identify commodities on arrival using stock control systems. Employees handle many tasks, but robotic assistants can be employed in modern warehouses to improve the results.
Human errors, such as inaccurate material receipt and categorization, may lead to stock differences. Suppliers may also mistakenly deliver unauthorized materials, resulting in stock discrepancies.
6. Human Error
Human mistake is a key cause of inventory discrepancy in e-commerce, influencing supply chains from beginning to end.
To avoid errors, ensure employees understand inventory differences, follow standard operating procedures, and conduct regular audits.
7. Inventory Management Glitches
Inventory management software has to integrate with current platforms for enhanced logistics, requiring guidance and continual assistance to avoid stock inconsistencies caused by incorrect tracking and forecasts.
Read Also: Supply Chain Trends
Methods to Avoid Stock Discrepancy
Inventory control is important for on-time shipment of goods, client fulfillment, or higher order scheduling. It helps in the decrease of logistics risks, avoidance of inappropriate orders, and the reduction of damage and theft.
Here are the best practices that you must follow to prevent stock discrepancy:
1. Double Checking Stocks Counting
Physical inventory counting is a critical method for identifying and preventing inventory inconsistencies. It involves physically inspecting products and matching inventory with stock records.
Double-checking reduces inaccuracies particularly significant in large stock collections. The ABC and FMR (financial management report) techniques determine the frequency of sales velocity audits, which can be performed quarterly or annually.
2. Identify the Stock Locations
Increasing material accessibility and mobility in e-commerce or production contexts may cause goods to be disorganized and place in various locations.
Physical inventory counts are important in preventing the mix-up of similar components and identifying product differences.
3. Connect with Manufacturers
You must maintain broad communication channels with valuable suppliers in the inventory management process. Collaborate effectively to address issues, specifically regarding stock fluctuations.
Training suppliers' workforce can reduce stock-outs, overstocking, and poor quality (COPQ) costs.
4. Check Inwards and Outwards Stock Levels
The businesses must work to improve warehousing accuracy in inventory by establishing a careful and accurate inward and outward process. Some actions to maintain ideal stock levels include double-checking supplier receipts and preventing discrepancies to prevent stock fluctuation.
5. Opt for an Inventory Management System
Effective inventory control systems enhance the productivity of online retailers by reducing counting time and boosting inventory levels.
Read Also: Inventory Allocation
Handle Stock Discrepancies With TranZact
Technological advancements have increased the need for better inventory management and control. Once the businesses can detect discrepancies and difficulties in the stock, it will further enhance customer satisfaction and happiness.
TranZact can help businesses streamline their stock discrepancies by offering the right support and proper inventory management solutions and tools.
FAQs on Stock Discrepancies
1. What is the reason for stock discrepancies?
Some of the reasons for Stock Discrepancies include stock theft, incorrect data recording, misplaced stocks, untrackable stocks, etc.
2. What are the necessary actions businesses should take if there is a discrepancy in stock?
The important steps businesses should take include double-checking stock records, making optimum changes, and removing records that may pose discrepancies.
3. How can companies lower stock variances?
Companies can take the following steps to reduce stock variances:
- Audit the bill timely
- Sign for every inventory item removed
- Simplify inventory record keeping
4. How do you deal with stock variances?
Adjust the available stock by adding more items to the inventory to handle positive variance. For negative variance, rule out excess items as wastage.
5. How can stock accuracy be improved?
Establish a comprehensive inventory system, use third-party software, issue audit trails, use barcode reading technology, etc., to improve stock accuracy.
6. How do you identify stock discrepancies?
Businesses can identify stock discrepancies by comparing two data sets of stock records during the same period and manually or using software to look for numbers that do not align.
