How do you audit and review your inventory control policy and performance regularly?

1 Define your inventory control policy

Your inventory control policy is a set of rules and procedures that govern how you manage your inventory. It should cover aspects such as inventory counting methods, frequency, and responsibility, inventory valuation methods, inventory adjustment and reconciliation processes, inventory reporting and analysis, and inventory risk management. Your policy should be clear, consistent, and aligned with your business goals and industry standards. It should also be documented and communicated to all relevant staff and stakeholders.

2 Conduct periodic inventory audits

An inventory audit is a systematic verification of your inventory records against the physical count of your items. It helps you identify and correct any discrepancies, errors, or fraud that may affect your inventory accuracy. You can conduct inventory audits in different ways, such as cycle counting, wall-to-wall counting, or spot checking. You should choose the method that suits your business size, complexity, and inventory turnover. You should also schedule your inventory audits regularly, preferably at least once a quarter, and assign qualified and independent staff to perform them.

3 Review your inventory performance indicators

Your inventory performance indicators are metrics that measure how well you manage your inventory. They can help you evaluate your inventory efficiency, profitability, and customer service. Some common inventory performance indicators are inventory turnover ratio, inventory days, inventory shrinkage, fill rate, and stockout rate. You should track and analyze these indicators regularly, using tools such as inventory management software, dashboards, or reports. You should also compare them with your industry benchmarks and historical data, and identify any trends or issues that need improvement.

4 Update your inventory control policy

Your inventory control policy is not a static document. It should be reviewed and updated periodically, based on your inventory audit results, performance indicators, and feedback from your staff and customers. You should also consider any changes in your business environment, such as market demand, customer preferences, supplier reliability, or regulatory requirements. Updating your inventory control policy can help you adapt to new challenges and opportunities, and ensure that your inventory management practices remain relevant and effective.

5 Train and motivate your staff

Your staff are the key to your inventory accuracy. They are responsible for executing your inventory control policy, conducting inventory audits, reporting inventory data, and resolving inventory issues. Therefore, you should train and motivate them to perform their roles well. You should provide them with adequate resources, tools, and guidance to manage your inventory. You should also establish clear roles and responsibilities, set realistic and measurable goals, monitor and evaluate their performance, and reward and recognize their achievements.

6 Seek feedback and improvement

Your inventory accuracy is not a one-time goal. It is a continuous process that requires constant feedback and improvement. You should seek feedback from your staff, customers, suppliers, and other stakeholders on your inventory management practices. You should also monitor the market trends, best practices, and innovations in your industry. You should use the feedback and information to identify your strengths and weaknesses, and implement changes and improvements to enhance your inventory accuracy.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?