Scheduled Counts (The Physical Inventory Process)
Each month, three different people must physically count everything in the warehouse. They each count separately (but at the same time). Two of the three people must be non-warehousing department staff. The physical inventory form template can be found here.
They do this in the following manner:
Phase 1, Counting
- They each count by stack or bin, writing down their count for each stack or bin.
- When they are finished counting all stacks, they compare their numbers. If they have different numbers, they must re-count until the numbers match.
Phase 2, Recording
When the three counters have numbers that match, they:
- Write each stack/bin’s count quantity (the amount they counted) on the stack/bin card and each sign beside it. These entries should be in a different color than the normal recorded commodity movements.
- Write each item’s quantity (the amount they counted) in the Warehouse Ledger and each sign beside it. These entries should be in a different color than the normal recorded commodity movements.
Phase 3, Reporting
When the counters have finished counting and recording,
- The Warehouse Officer fills in an Inventory Report. This becomes the official status of the stock as of the date of the count, and replaces any previous counts.
- The Warehouse Manager distributes the Inventory Report to Stock Owners, the Emergency Team Leader, and any other key staff on the team.
This is important.
Someone from the main office should also do a surprise count, approximately once each month. Non-logistics staff will carry out these counts, using the same methods described above under Scheduled Counts.
Make sure warehouse staff know that these will take place, but do not know when.
If the three people repeatedly count a quantity that is different than the quantity written on any stock/bin card or in the Warehouse Ledger, they must work with the Warehouse Officer to figure out why there is a difference. To do this they will retrace all transactions since the last inventory count and verify related entries on the warehouse documents.
This process consists of going line by line on the bin card from the last inventory count, and verifying each entry against supporting documentation (waybill, general ledger, reconditioning report) to check the accuracy of all records, and recalculating the balance to confirm the balance on the stack card, after each transaction.
If they still cannot explain the discrepancy, then it must be recorded as a warehouse loss, attributable to the Warehouse Officer. The inventory team must write a loss report and more elaborate investigations can take place.
Usually the next step after submission of an inventory report showing an unexplained warehouse loss is that an auditor conducts a more extensive inquiry, including further verification of records (to verify that there is no falsification of documents, check warehouse movements), interviews (to verify who had access to the warehouse and under what conditions, etc…).
The warehouse can remain in operation during an investigation, receiving and dispatching as needed for emergency operations. But you should increase supervision until the examination can figure out why there was a problem.