What is a gap in stocks?

Top 5 causes of warehouse stock discrepancies and our tips to avoid them

What is a gap in stocks? As we know, stock discrepancies are the real pet peeve of any business. Planning, logistics, sales, or finance can be heavily impacted by these errors.

An underestimation of the references stored within a warehouse can lead to a shortage of stock and an inability to meet customer demand on time. Conversely, an overestimation of quantities can lead to goods not being sold, their obsolescence, superfluous purchases, or even overconsumption of storage space.

But how do explain the stock discrepancies? This article details the main causes of discrepancies starting from a macro scale down to a more operational level. For each of these causes, we offer you solutions to put in place in order to prevent and limit the discrepancies as much as possible.

What is a gap in stocks?

1 . Lack of organization of storage space

The location and organization of the warehouse are the keys to logistics performance because they directly impact the operational teams. A poorly tidy warehouse is a warehouse in which human errors will multiply. The lack of organization results in the poor demarcation of activity areas, missing signage, unlabeled storage locations, or even cluttered picking aisles.

  • Sizing of the warehouse: a warehouse must above all be correctly sized to absorb the activity of the company and its possible variations. In the event of overload, the capacity can be increased thanks to optimized shelving adapted to the products (e.g.: high shelving, mezzanine, etc.). If this is not enough to absorb growth or peaks in activity, the temporary rental of an overflow platform should be considered. On a larger scale, the conduct of a logistics master plan may be considered to review the organization of storage sites.
  • Organization of the warehouse: the main areas of activity (reception, storage, preparation, and dispatch) must be optimized and organized according to the logic of the flow to separate and streamline the various operations carried out. Areas dedicated to non-standard activities (quality control, quarantine, cross-docking, etc.) must also be identified and ordered.
  • Visual management: the use of colored signage and display panels makes it possible to highlight the zoning of the warehouse and dispel doubts and confusion. In the shipping area, for example, we recommend delimiting the spaces dedicated to pallets awaiting shipment with floor markings and numbering the loading bays to prevent a pallet from being loaded into the wrong truck. Each tool or product, whether handling equipment, consumables, or finished products, must have a defined and identifiable place. On the shelves and pallet racks, each storage location is to be labeled with its codification and an associated barcode.

2 . The unreliability of data

Far from being negligible, the article base is a key element of stock management. A denomination or handling unit inconsistency between a physical product and its IT item record is a source of confusion in the field. For example, if your database considers that an item code corresponds to a 75cl bottle of wine, but in reality, the product is packaged in cases of 6 bottles, the operator will pick up the case.

  • Computerized management: the first condition for making your data more reliable is to prohibit any use of paper or any other “degraded” counting method. Warehouse management software (WMS) and its range of features (radio frequency, voice picking, etc.) give you all the cards in hand to secure and track your daily operations.
  • Packaging unit: the packaging or consumption units must be homogeneous between the systems (ERP, WMS, TMS, etc.). For example, for cable that can be referenced in rolls, m² or linear meters, it is essential to use a conversion that can be understood by the people handling the product. For factory warehouses operating with consumptions on BOM, non-whole quantities are a source of error, it is advisable to pass these references in actual consumption or on Kanban when leaving the warehouse.
  • Verification of EDI: the correct transmission of information between the systems is essential, a verification of the mapping and the consistency between the units used by each computer system will make it possible to correct any discrepancies.
  • Management of new entrants: any new product must be accompanied by an article sheet, generally created by Purchasing or R&D without having the product in view. A reception block can be configured in your WMS to make it mandatory to check and validate logistics data (dimensions, weight, etc.)
  • IT audit: a spot check of databases as well as an audit of nomenclatures, in particular following the creation of new products, will reduce the risk of inconsistency. If major errors are observed, a longer-term project will have to be carried out with the teams responsible for the article database and its update in order to start from a usable database.
  • Supervision & training: the training of operators on the characteristics of the products and their nomenclature ensures consistency between the physical count and the computer entry. Supervisory teams must pay attention to the transmission of knowledge, in particular during seasonal team reinforcements.

What is a gap in stocks?

  1. Supplier issues

Discrepancies can also be caused by errors made at the supplier level (mislabeled products, missing parts in a batch, etc.) which tend to override the vigilance of receiving operators.

  • Control on receipt: in addition to the standard control of parcels on receipt (integrity, quantities, etc.) you can introduce a second level focused on sensitive products and suppliers at risk. The application of the AQL standard (acceptable quality level standard) makes it possible to size the sample of products to be tested to determine if the batch is acceptable.

Visual control can be automated thanks to reading cameras or RFID gates that allow automatic recognition of labels on packages. The tool communicates with the WMS which makes the link with the logistics data to count the units.

  • Weight control: the use of scales, pallet scales, or weighing hooks in the reception area also makes it possible to ensure the conformity of a delivery.
  • Notification of change: an obligation to alert in the event of a change in packaging can be integrated into the supplier contract in order to update your database prior to receipt. In the event of a change in the product nomenclature, a versioning system with a specific code can be applied to differentiate the products.
  • Follow-up of disputes: all these errors inherent to the supplier must be the subject of a complaint and follow-up with a view to ensuring the reliability of future deliveries.
  1. Human errors

Human errors arise from all the causes mentioned and can be varied: confusion when picking up a reference, preparation error, storage in the wrong location, counting error, etc.

Some ideas to overcome this: 

  • Organization of the picking: in addition to the indications and visual instructions, we recommend avoiding positioning two references with a similar appearance in neighboring locations to avoid confusion.

For small parcels, a “pick-to-light” device illuminating the location to be picked and displaying the quantity required can be a good help.

  • Prepares control: as for the reception, a verification weighing can be carried out as well as a precise recount per wave of parcels on hold.

Returns management: warehouses that receive product returns from end customers must increase their vigilance. A systematic control package by package must be carried out, it is essential to invest time in this step.

  1. Losses

Inherent in the life of a warehouse, product losses can be linked to various hazards: breakage, theft, poor management of expiry dates, lack of team training, product stacking, temperature variations, etc.

  • Inventory management method: your inventory management method must be adapted to the nature of your products. A company distributing perishable products must make sure to respect the rules of the FEFO (First Expired First Out) by sending priority to products close to expiry. You can rely on your WMS to identify the optimal location for these priority products. In supermarkets, the resale of short-dated products to wholesalers outside the traditional circuit may be considered a last resort.
  • Rotating inventories: in addition to the annual accounting, and inventory, the regular conduct of rotating inventories in the picking areas (where 90% of the discrepancies are created) as well as in the empty locations is strongly recommended.
  • Security & surveillance: the strengthening of access rights to storage areas, the installation of mesh cells, or even a surveillance system are effective levers for combating unexplained losses. Access to the warehouse must be reserved for authorized personnel only and internal employees or external service providers must not access it without the support and a valid reason.

Conclusion

There are therefore many solutions to improve inventory management. Their gradual implementation creates a virtuous circle and gradually improves the performance of your operations. At Citwell, we can support you in this improvement process, from the diagnostic phase to operational implementation.

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