What asset do you have that is more valuable than your people? Inventory! Without it what business would your company be in?

Year after year we try to get a handle on this thing called inventory. We select the weekend, we order lunch, we discuss who will be responsible for bringing in the doughnuts, we make sure someone orders enough pencils and markers, we get the post-it notes and the dots, and listen to our people give us any number of excuses as to why they can't make it. Then, we talk about the inventory! Is it just me, or is there a lot of preparation that goes into the weekend and not a lot of preparation that goes into why we have to be at work that weekend in the first place?

Think about it, what does having an inaccurate inventory cost your company? First answer this question, what does an inaccurate inventory affect? Your profit margins, your turns, your fill rates, your service levels, and customer satisfaction, to name a few. But most importantly it affects the productivity of your warehouse operations. Your people spend an average of an hour a day searching for inventory that has been misplaced, received incorrectly, put away wrong, stolen, or put on a return in error. Your customer service department is constantly going to the warehouse to check and see if what the system says is in the bin is actually in the bin. Maybe they should be paid by the mile? Your purchasing department is constantly searching for products to fill back orders for items that were just received but now cannot be found. How many times have you heard, “The computer said we have it, but when we looked in the bin it wasn’t there?” How much is an inaccurate inventory costing you? It's costing you thousands if not millions of dollars!

Order picking usually accounts for about 50 percent of your total warehouse labor. Losing one hour of labor because of an inaccurate inventory means money down the drain. Your annual physical costs are how much? Pizza and drinks ($100), miscellaneous items—pens/pencils/cards/markers/dots ($100), personnel overtime for fifty people to count Saturday and Sunday at $10 per hour ($12,000). Does everyone included in your inventory make $10 per hour? Think about this: assume your company earns a 4 percent net profit before taxes. That means it takes $2500 in new sales to make up for $100 in lost products. If your warehouse loses $100 per week, the sales department needs an additional $130,000 in new sales each year just to break even. Again I ask, how much is having an inaccurate inventory costing your company? You select the number!