Physical inventory is defined as a physical count of stock, located within a storage activity, for verification of the stock balances as shown in the accountable records with the quantities of material actually stored in the distribution facility.?

It includes all actions associated with the:?

   Planning

  Training of personnel

 ?Preparing the stock for count

 ?Actual physical count?

   Necessary research on discrepancies

?nbsp;   Reconciliation of the results

?nbsp;   Isolation of conditions contributing to inventory discrepancies.

U.S. General Accounting Office (GAO) standards require that periodic physical inventories be conducted for this purpose.  

Knowing where the stocks are in the distribution facility is of critical importance to management.

  The Importance of Accurate Inventory Records

Accurate inventory records are a prerequisite to satisfying customers' needs in a timely manner, assisting in stock replenishment decisions, and in analyzing the inventory to determine whether there is too much or too little stock. 

Inaccurate inventory records, on the other hand, result in frequent denials and lost "sales," stock shortages and excesses, missed delivery dates, lower productivity, and an excessive number of special "expediting" actions and increased transportation costs.