6 good reasons to hire a professional inventory service and 3 good reasons to be precautious Part 2

Image from Francesco Marino and FreeDigitalPhotos

4 good reasons to be precautious
In my last post, "6 good reasons to hire a professional inventory service," I mentioned some excellent reasons to hire a professional service over utilizing and maintaining an in-house inventory team. Smaller retail stores with little or have limited chain may still prefer an in-house only because, it is simpler and less complex to manage. But for big retail chain such as Walmart, or Home Depot where existing systems are complex, fast-paced, and diverse,  hiring an inventory service is the way to go.

But granted that you have decided to hire a professional service, and now that they are in your store to count the merchandise, now what? Would you rather go to your office, sit and relax and wait for the result? Or would you go and simply perform your normal day-to-day functions as a manager?

Neither.

Spearhead the inventory or at least be participative. As the store owner or manager, there are 4 things you must be aware and be precautious about when the inventory people began to count your merchandise.

First, watch out closely on data accuracy

Image from Filomena Scalise / FreeDigitalPhotos

Accuracy is relative. Experienced inventory auditors are aware that it is relative on existing variables such as but not limited to procedures, inventory policies, business practices, nature of the business, economic demographics, etc. It also depends on the nature of merchandise retailers sell. For instance, a jewelry shop has a maximum tolerable margin of error between .1% to .5% or $1,000 to $5,000 in every $1 Million worth of items. OR a retail store that sells Jell-o, noodles, and similar products, has a higher tolerable margin of error. For a car dealer that sells high end A-class vehicles, the tolerable margin is zero.

With all the types of physical inventories, the least accurate of them all, relatively speaking is financial inventory. Although there are few exceptions to this rule, most financial inventories concern more with retail dollar totals of the merchandise in a store than the actual UPC validations. Most groceries, and marketplaces conduct inventories using financial. In financial, you simply key in price and quantity OR scan and count items by price points. Because of this, most inventory takers will count grocery stores where accuracy is only second to speed. I've been into several financial inventories in the recent past where topguns could count 20,000 APH. In a normal grocery store with 320,000 pcs. of merchandise, 4 topguns could easily down the store in less than 4 hours! It is hard to admit but, this is a case when accuracy is equal to estimate and estimate is equal to accuracy.

This is not to paint a negative image among inventory takers. It happens oftentimes. And when it does, it can be the worst nightmare for the store manager. I will give you an example: Few years ago, a huge marketplace was scheduled for an inventory on the day before New Year's Day. The inventory went so fast since everybody, including the store people, were hurrying up for home for New year's Eve preparation. The supposedly 5 hours of inventory went for about 3.7 hours. There were not much ocular checking and the inventory result seemed acceptable.

The inventory team packed their equipment and sped away leaving the store manager seemingly satisfied with the result. But just as they left the store, district store managers arrived for the inventory but it was too late. The managers compared and revalidate data and found huge irreconcilable discrepancies with the physical merchandise. The store management went into fits of madness and apoplexia. They called the local inventory district office but nobody was there anymore. They finally got hold of the inventory main office and demanded for a complete store recount first thing in the morning on New Year's Day.

Imagine getting back to that store in the very morning of New Year's Day. It was the worst experience to begin in a New Year's Day. I've known hundred of cases where inventory counters were kicked out from the inventories due to gross inaccuracies. It is OK to make mistakes. But for a job where you pay for accurate counting, there is a very limited excuse for mistakes. It is one of those times when you didn't  get what you paid for.

So, this is my $0.2 advice for retail managers who hire professional inventory service: The lesser you or your people participate in the inventory, the worst the inventory will become. If you are care less about accurcy, they don't seemed to care either. Trusting them is good, but being actively participate would be a lot better. It can save your butt in the long run.

Second, be concerned about right staffing

Image from Salvatore Vuono / FreeDigitalPhotos

One of the causes of inventory delays is not having the right number of people and the right kind of people. Prior to any inventory schedule, Inventory managers in most cases, will conduct an ocular pre-inventory visit to your store to determine the right number of counters needed AND what kind of counters you get, discuss with you other preparations needed and other concerns as well.

But I can almost guarantee you that the actual number of counters you have requested would not show up in your store. And the worst is, even if they show up, you won't have any clue whether they are experienced counters or not. You could get half of the number of people you have requested but the inventory results can be more accurate, executed just right on time. If you require a time-sensitive inventory, do not let them start the inventory, but only AFTER the required number of people are met.

Right number of people does not guarantee an accurate and timely inventory either. But how do you determine whether you have the right people? Its easy. In the first hour of the inventory, determine the frequency or instances of errors from the number of auditors present and the percentage of accomplishment yet to be done. Analyze your data and you go from there. Do not be afraid to kick some butt due inaccuracy or experience-related issues. Because it is better to work with fewer people having little or getting manageable errors than working with bunch of noobs and rubes masquerading as expert counters.

Third, paycheck over customer service
Whether you are a retailer, an employee, an inventory service provider, or a manufacturer, everbody wants to make money, lots of money. But, there is no more important in business than meeting customers' expectations thru effective customer service. So, from a retailer's point of view, how do you spot an inventory professional if he is more concern of your check than checking to make sure you are getting the right service you deserve? Well, it is not easy to spot but there are ways.

If the inventory professional is more concerned of his time as opposed to efficiently spending time resolving issues. But sometimes, there are store managers who insist more time in UPC verifications that go beyond the agreed inventory duration. It maybe a hard truth to take, but no matter how much you wanted to get a good inventory results, a lot of times, you only get what you pay for.

To avoid this situation, here's my advice: Prior to the beginning of the inventory, make sure to talk with the inventory manager to discuss and agree on how things should be done, and what rules that have been agreed upon and work with those rules. In that case, you and the inventory manager do not overlap with unnecessary expectations. In that way, both of you will focus on how the inventory could be done in the shortest possible time in the most efficient way. In the end, you shall reap the benefits of a long lasting business relationship where trust and confidence are not compromised.

To all inventory providers: accuracy is not your primary concern, the customer IS your primary concern. Because in the customer's point of view, there is no degree of importance between accuracy, work efficiency, and reliability. For them, they are all equally important. Customers expect these not as separate entities, but as a bundled services to arrive on what we call, complete customer service.

So when you put your customer's expectations as your primary concern, you are not only meeting one aspect of inventory, which is accuracy, but a whole range of expectations from your customer. And when you do that, you are not only leaving a good business image for your clients but customer service that build loyalty and good profits.

Lastly, the issue of a compromised data
Here, I am not talking about inventory result being hacked or data being corrupted due to a malicious software. I am talking about inventory results being manipulated in favor of a better result. This could be done using a lot of methods such as shortcutting the inventory process, altering data in collusion with two or more people, or simply manipulation of data by a person.

Few years back, a team of inventory auditors was scheduled to perform a buy out inventory. This is the kind of inventory when another retail company decides to takeover or buy another store and determine the value of the merchandise in the store. The inventory was done efficiently after a thorough validation and verification. A report was generated and turned over to store management. There was a problem: when results were compared, the current count was $1,125,000.00 compared to the previous count of $1,005,000.00  That was a huge $120,000.00 difference. After considering all variables, the management didn't accept the result and requested a second count. The store management talked with the inventory manager and said they wanted more money.

Half of the inventory crew have left the store already. The remaining have agreed to perform the second count and the result was around $116,000.00 short, which is still consistent with the initial results. The expected inventory duration was over. He knew he can be penalized if he goes beyond the required inventory period. The pressure is mounting. He decided to short cut the results. He did not make a secondary report, but instead, he discreetly adjusted various totals from the second count using different departments that he thought reasonable. He run the report for the third time. Not quite. He made some adjustments again and run it for the nth time. And viola! the adjusted and final results are now more consistent with the store manager's expectations. He turned over the reports and the store manager seemed contented.

That is classic example of a compromised data. Accuracy is a serious and delicate matter. It can make or break a business, a reputation, or a job.

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