Accurate stock counts are crucial for your e-commerce business. Knowing what you have on-hand affects everything from customer satisfaction to demand forecasts and overstocks or stockouts. In this blog, we’ll investigate seven of the most common mistakes in the fulfillment process that can lead to inventory discrepancy, as well as explore seven ways a 3PL can help you prevent these errors from occurring in the first place.
What Is Inventory Discrepancy?
Inventory discrepancy occurs when your inventory record in your warehouse management system (WMS) differs from what’s actually on the shelf. Inventory discrepancies are no small thing — as they can cut into your profit margins and negatively impact customer experience (i.e., when a customer orders a product because it’s listed as “in stock” only to find out the product isn’t actually in the warehouse).
Common Causes of Inventory Discrepancy
E-commerce warehouses are large spaces full of constant activity and chatter. The last thing you want to do is add unnecessary confusion on top of that because of inadequate warehouse optimization and processes. Accurately tracking the number of every SKU as it makes its way into and out of the warehouse is no small task. A mistake at any point in the fulfillment process can lead to inventory discrepancies.
We’ll explore some of the top causes of inventory discrepancy below to help you get a better idea of where the issue may be arising in your fulfillment process.
#1 Glitches In the Supply Chain
Supply chain glitches can lead to inventory discrepancies by sending the incorrect amount for a SKU. Suppose your advance shipping notice (ASN) lists 50 of a particular SKU, but only 40 arrive. If your team relies solely on the ASN and incorrectly logs 50 SKUs, you’ll wind up with a discrepancy between what you think you have and what’s actually on the shelves.
Inadequate quality checks can also result in inventory discrepancies. If an item is damaged during transport to the fulfillment warehouse and your team fails to properly inspect the item upon receiving it, then the products in the system may be labeled as ready to pick and ship when, in reality, they don’t meet shipping standards.
#2 Warehouse Losses
Inventory can easily go missing without the proper business inventory management systems in place. Misplaced inventory could be sitting on a dock somewhere without being logged into stock, or put in the corner of the warehouse, only to be forgotten about. Wherever it may be, the result is the same: you ended up paying for inventory that you can’t access because you don’t know where it is.
#3 Theft
An unfortunate yet common cause for inventory shrinkage — which is inventory loss after your products are received, documented, and shelved — is employee theft. While an experienced 3PL is able to take measures that protect against theft, not every warehouse is capable of preventing it or rebounding from the incident(s) should theft occur.
#4 Damage
Mishandling inventory after receiving it can result in damage to the products, which can also lead to inventory shrinkage. For instance, stacking boxes so high that the weight crushes the inventory on the bottom pile or storing items incorrectly (if they’re temperature sensitive, for instance) can result in unnecessary damage to inventory.
#5 Improper Inventory Management
Inventory management can take many forms — and so can failures in inventory management. For instance, inaccurate physical inventory and cycle counts can lead to inventory discrepancies. It’s important you have accurate records of your inventory count — which means a trained team and advanced warehouse technologies — to help you gain a clear understanding of when you need to reorder certain items.
#6 Poor Returns Processing
Returns are a growing challenge for many e-commerce companies, especially for companies in fashion and footwear. It’s important your order fulfillment process is able to handle returns and know when returned items can be placed back in stock.
If you don’t, you’ll likely end up with items marked for picking that aren’t actually on the shelves, and vice versa. It’s also important that returned SKUs are accurately tracked, something reverse logistics technology can assist with.
#7 Outdated Software
Up-to-date fulfillment technology and inventory management software are vital to the order fulfillment process. It’s important to make sure your inventory management software — or the software of the fulfillment partner you outsource to — is kept up-to-date.
How to Resolve Inventory Discrepancies: Partnering with a 3PL
With a better understanding of some of the missteps that can lead to inventory discrepancies, the next logical inquiry is how do you resolve inventory discrepancies? Below are seven ways a 3PL can help you prevent inventory errors and increase company growth and customer satisfaction.
#1 Receiving Processes
A 3PL that utilizes fulfillment software such as an ASN can compare the SKU count in their system with the actual quantity received and inspected for damage. This helps prevent inventory discrepancy from the start, cutting down on inventory errors before they’re even introduced into the fulfillment process.
#2 Security Protocols
Video monitoring services in every area of the warehouse cuts down on theft and allows a 3PL to find the cause of misplaced stock. If it were the result of an employee mistake, an experienced 3PL can provide further, individualized training to make sure it doesn’t happen again.
#3 No Inventory Shrinkage
At Jay Group, our trained teams of warehouse professionals and advanced fulfillment technology reduce the chances of inventory shrinkage to next to nothing. However, we still ensure any items lost or damaged after arriving at our fulfillment centers are covered in our contracts.
#4 Expert Product Handling
An expert 3PL will have the capabilities to move loads of heavy products with efficiency and safety. We recommend visiting your potential 3PL (when possible) to see how they operate in real-time. A quality 3PL will have everything necessary — from trained professionals to licensed forklift operators — to accurately and appropriately move inventory around the warehouse.
#5 Knowledge of Strategic KPIs
A 3PL can help you improve key KPIs, such as order cycle count. Your fulfillment partner should also be able to perform comprehensive physical inventory and cycle counts that don’t interrupt the flow of orders. This helps ensure your customers are receiving the correct orders as quickly as possible while cutting down on picking inaccuracy kitting mistakes.
#6 Returns Management
Returns should be handled with the same care as outbound shipments. A 3PL with the necessary quality checks in place can evaluate whether or not a returned item can be resold based on your criteria. Also, be sure the 3PL you partner with has reverse logistics capable of handling returns, product recall management, restocking and inventory management, and more.
#7 Warehouse Management Systems
At Jay Group, our warehouse management professionals and WMS ensure the inventory levels you see in your dashboard are up-to-date and accurate. We also implement checks and double-checks to reduce human error, and all three of our temperature-controlled warehouses are optimized for operational efficiency, all meeting the highest standards for inventory management.
Be sure the 3PL you partner with is one that can handle supply chain disruptions while also offering complete transparency to you along the way.
Put An End to Inventory Discrepancies
Inventory discrepancies can affect your customer’s perception of your business and cut into your bottom line. However, lost, damaged, or misplaced inventory is something that can largely be avoided simply by partnering with a 3PL.
At Jay Group, we know how to reduce inventory discrepancies to help you grow and scale your business. Contact us today to see how we can help you.
