Contactless Stocktaking – Added value in warehouses through statistical inventory sampling

2020 will certainly be remembered as a year that changed our habits and conventions in many ways. While international supply chains are slowly recovering from the global lockdown, the situation is still quite unusual. Here are a few thoughts on how you can use these economically weak times to generate added value in your warehouse.

Speed up your inventory controlling

Counting inventory is a task that is often associated with being a time-consuming, non-value-adding work process on the closing date of annual accounts. Why bother now? Sooner or later this task will come up again, because precise controlling of inventories helps to better plan and schedule production processes, eliminate errors, and improve the amount of on-time deliveries to customers.

With this in mind, anyone hoping for an upturn in the economy and wanting to increase productivity towards the end of the year would not want to deal with an full inventory or even close down the warehouse to do so at that important point of time. Instead, it seems advisable to conduct the physical inventory now in advance and to make it more efficient and secure by means of sampling procedures, which requires way less time and people.

Why a full inventory is no longer appropriate?

In order to cope with the workload of a full inventory, in the past, companies often had to employ additional staff or external inventory personnel to count stock items in a confined space in the warehouse. This is no longer an option for businesses that value current occupational safety measures such as contact restrictions. Besides, it would also involve high labour costs.

However, even regardless of the corona pandemic, high costs, downtimes of warehouses and employees as well as the error-proneness of a full inventory with many counting personnel, all speak against such an approach. Compared to that, statistical inventory sampling is proven to save up to 95 percent of the costs and 99.9 percent of the counting effort of a full inventory.

It is, therefore, particularly suitable for counting the inventory count within a few hours without contact between employees. Otherwise unproductive inventory days will remain productive working days.

What is statistical inventory sampling?

In inventory sampling, only a small portion of selected but representative stock items are counted manually. Mathematical-statistical methods are then used to extrapolate the documented result of this inventory sampling to the total stock in the warehouse.

In very simplified terms, this is similar to weighing the weight of a component in order to calculate the weight of ten identical components by multiplication. It would have been much more complicated to weigh all ten components individually and add up the results. These tried and tested mathematical methods for inventory sampling are often even more accurate than manual counting, where many errors can occur.

Contactless stocktaking step by step

1. Contactless integration in the cloud: Inventory sampling systems are often add-on systems and build on existing warehouse management or ERP systems. In this way, they obtain all necessary data via interfaces that function either in text form with a fixed record format or as an Excel file with variable column arrangement. On-site installation is not required due to cloud-based special systems, and these can be integrated within a few hours.
2. Contactless project management: If you are working with an inventory sampling system for the first time, you can either receive virtual training in its operation or outsource the entire execution. In this case, the software provider receives the required warehouse and stock data for evaluation and prepares it in such a way that it can be used for the inventory sampling algorithms.
3. Contactless inventory sampling: First, it is determined which mathematical procedure is suitable for the warehouse in question and which items must be counted as samples. Ideally, the counting effort can be reduced to up to 31 samples on a key date using the highly efficient sequential test. While in the past it was mainly used in automated warehouses, today it can be used to count a wide variety of warehouses with hundreds of thousands of storage positions.

If there is not enough meaningful data available for this purpose, it is recommended to use difference estimation for a permanent inventory. In this way, employees who work in the warehouse anyway, taking into account occupational safety, can integrate the counting into their daily work. Additional inventory personnel becomes obsolete.

4. Contactless evaluation: The result calculated by the software can be completely processed virtually.

Once the inventory has been completed precisely and securely, the economic upturn can come.

How are you conducting your inventory during these challenging times?