For ecommerce brands and logistics providers–like third party logistics (3PL) warehouses–it is crucial to keep operations well-stocked so you can fulfill orders quickly and accurately. However, maintaining accurate inventory is challenging, especially when managing a large inventory. Everything from human errors to system glitches can make inventory management a nightmare, ultimately leading to inventory discrepancies, unhappy customers, lost sales, and decreased profits.
Accurate inventory is the heart of your operations. By taking preventative measures and addressing discrepancies when they arise, you can ensure your warehouse inventory management runs smoothly and successfully. Understanding the reasons behind inventory discrepancies and how to manage them can help you turn challenges into opportunities to refine your systems, improve efficiency, and create a seamless experience for everyone.
To avoid these issues, it’s important to understand why they happen, identify common pitfalls, and explore root causes so you have the knowledge to prevent them—and effectively respond when they occur.
An inventory discrepancy happens when a tracked or recorded amount of stock doesn’t match the actual number in your stores, warehouse(s), or distribution centers. When inventory records don’t align with stock on hand, you may be left scrambling to fulfill orders, leading to frustrated customers and lost sales. Or, conversely, you could have overstocks, which cost you money and take up valuable warehouse space.
Inventory discrepancies pose significant challenges for ecommerce sellers, affecting operations, customer satisfaction, and financial performance. They can also impact 3PL providers, who handle warehousing and fulfillment strategies for ecommerce sellers. Below are six examples of inventory discrepancies you may encounter:
Mismatched inventory counts occur when your stock counts in the warehouse or fulfillment center don’t match the recorded inventory count in your system. For example, your inventory control system could indicate that you have 200 units in stock, but your team only finds 180 units during a routine inventory check. This could be caused by errors when receiving goods, misplacing items, theft, or incorrect tracking of sales and returns.
Out-of-stock discrepancies often occur when your tracking system shows that a particular item is in stock and ready for purchase, but when customers try to buy it, your warehouse operators discover it’s out of stock. For example, if you’ve integrated your warehouse inventory management system with your online storefront, you could encounter delays or inventory errors when your stock levels get updated. If your stock levels aren’t updated frequently enough–or leveraging real-time data–customers may place orders for items that are already sold out, but the system hasn’t yet reflected this. As a result, the system could still show the item as available, which can lead to customer dissatisfaction and order cancellations.
Overstocking happens when sellers stock too much inventory, causing it to exceed demand. Dead inventory occurs when items are unsold for a long time and tie up capital and storage. This can happen if you overestimate demand for a particular product based on optimistic sales projections, seasonality, or bulk supplier discounts. However, if demand does not materialize as predicted, the items may sit in warehouses for an extended period, resulting in dead inventory. Overstocking could also lead to financial losses if you eventually have to discount or write them off.
Misplaced inventory occurs when items are not stored correctly, such as in the wrong location or places within the warehouse or fulfillment center. This leads to discrepancies between the actual count and recorded inventory count. For instance, when you receive a shipment of products, you assign them to specific storage locations based on your inventory management system’s instructions. However, common warehouse management challenges associated with inefficiency and human error can result in some items going in the wrong bins, shelves, or aisles. As a result, when someone conducts an inventory count, discrepancies arise.
Shipping errors occur when the wrong items are picked, packed, or shipped, resulting in inconsistencies between inventory records and delivered products. For instance, if there are discrepancies in your fulfillment processes, such as selecting incorrect items or quantities, or if someone damages products during packing, customers may receive incomplete or inaccurate orders. Consequently, your inventory records will not match the shipped items, leading to discrepancies.
Inventory shrinkage refers to the loss of inventory due to theft, damage, or other errors, which creates a difference between the recorded inventory numbers and the actual stock. For instance, you may encounter product theft by warehouse employees, external theft during transportation or storage, or mistakes in receiving, counting, or recording inventory. Inventory shrinkage can cause significant financial losses for both the 3PL provider and the ecommerce sellers whose inventory is affected.
By implementing some best practices, you can effectively prevent inventory discrepancies, improve accuracy, and optimize operations for greater efficiency, control, and customer satisfaction.
Ecommerce sellers and 3PLs can take various measures to reduce inventory discrepancies:
Read below for expanded insights into some of these key tips for reducing inventory discrepancies.
It’s important to schedule regular physical inventory counts at predetermined intervals. During these counts, physically count every item in stock and compare it against recorded inventory levels. To make things easier, consider using inventory software with automatic, real-time updates that can integrate with your sales and shipping systems.
If you find any discrepancies during these counts, reconcile them quickly. You should also routinely check for errors in receiving, picking, packing, or recording inventory so you can take corrective actions and ensure greater accuracy.
Maintaining accurate inventory records is crucial because it reduces the likelihood of stockouts or overstocking, improves order fulfillment accuracy, and enhances business continuity. It also helps prevent revenue loss due to shrinkage or incorrect inventory counts.
Advanced inventory management software provides a range of features such as real-time inventory tracking, automated replenishment, barcode scanning, and integration with ecommerce platforms and other systems. This software helps reduce discrepancies by providing accurate and up-to-date visibility into stock levels across all locations and channels.
With real-time tracking, you can monitor inventory movements, identify differences, and reconcile records promptly. Barcode scanning and automated processes streamline operations, reduce manual errors, and improve data accuracy.
This software is essential because it enables you to make more informed data-driven decisions, forecast demand accurately with data-driven insights, and reduce the risk of inventory problems.
Rigorous quality control procedures that instill best practices for receiving incoming shipments, storing, picking, packing, and shipping inventory, as well as conducting quality inspections and verifying inventory accuracy ensure accurate counts of all incoming inventory. Additionally, inspecting inventory for damages or defects, and recording issues in your software for precise record-keeping is essential.
You can take corrective actions by identifying discrepancies immediately upon receipt, such as initiating investigations, contacting suppliers for resolution, or directly updating inventory records. Strict receiving and quality control processes help your teams maintain data integrity and uphold service quality standards. It also minimizes the likelihood of shipping incorrect or defective products, improving customer satisfaction and reducing potential returns or disputes.
A robust WMS should have features like real-time inventory tracking, barcode scanning, RFID tracking, and automated workflows with real-time visibility into stock levels, storage locations, and movement within your warehouse network and shipping partners.
When you use a WMS (especially for 3PL inventory management), you can better meet customer expectations for timely and accurate order fulfillment. Software features such as barcode scanning, automated workflows, and data analytics pinpoint discrepancies at every stage, from receiving processes to picking and shipping, minimizing manual errors and improving overall accuracy.
Training your warehouse staff comprehensively on proper inventory handling techniques, accurate data entry, and adherence to standard operating procedures can equip them to perform their roles accurately and efficiently. This helps to instill a culture of accountability and attention to detail, thereby reducing errors in receiving, picking, packing, and shipping processes.
Training can help your staff maintain high-performance standards, enhance the overall service quality you provide customers, strengthen client relationships, and establish your business as a leader in supply chain management.
Extensiv's warehouse management solution for private warehouses and 3PL Warehouse Manager for logistics providers offer features to help you tackle inventory discrepancies, which is crucial for efficient warehouse operations.
Designed for ecommerce businesses and retailers managing their own warehouses and inventory, this WMS can:
Related to solving inventory discrepancies, Extensiv can improve your inventory management by automatically counting high-value items on a set schedule to identify discrepancies quickly, use real-time inventory data to trigger reorder points and prevent stockouts, and leverage barcode scanning for error-free order fulfillment.
Built for logistics providers managing inventory for multiple clients, 3PL Warehouse Manager can:
To tackle the challenge of inventory discrepancies, Extensiv can help your 3PL better manage inventory and warehouse processes with data analytics capabilities that identify slow-moving inventory and high-demand items and empower you with information to negotiate better contracts with clients.
Whether you’re a seller managing your own fulfillment or a 3PL orchestrating logistics processes for multiple clients, Extensiv offers tools and resources that align with your warehouse management needs and empower you with efficient, accurate inventory control systems.
Interested in learning more? Request a demo today!