Reasons and Solutions for Inventory Discrepancies in the Electronics Industry

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Inventory management is vital in any business or industry, but one could argue that it’s especially challenging in the electronics industry. It’s not uncommon for a firm to have 20,000-plus serials in a single warehouse, which can make keeping track of inventory a nightmare for everyone involved.

Discrepancies are commonplace and can have a significant negative impact on even the most successful operation.

Five Common Causes of Inventory Discrepancies

If you want to avoid inventory discrepancies in the future, you have to understand their typical causes. Otherwise, you risk playing a guessing game and might possibly drive your inventory levels in the wrong direction.

Instead, educating yourself on the issues can move your business in the right direction and increase profits by eliminating the root causes of a potential supply chain collapse. Herewith, we delineate the most common causes of inventory discrepancies in the electronics industry.

1. Shrinkage


Some have labeled shrinkage as “Public Enemy #1” for companies across all industries. According to the research, shrinkage — which can include shoplifting, administrative errors, and employee or supplier fraud — cost the global retail industry $128 billion in 2014.

It cost the United States $42 billion alone. On average, shrinkage accounts for 1.29 percent of total retail sales.

But it’s not just eating into revenues and profits. Shrinkage also wreaks havoc on inventory levels and causes bewildering discrepancies that can lead to hours of wasted time spent trying to overcome frustrated reconciliation attempts … which only depletes your resources even further.

There are many possible solutions to curb shrinkage, but realistically, you won’t know which ones will work for your operation until you begin to implement them. In most cases, vigilance is the primary answer.

While you may be a trusting person, you shouldn’t be quite so trusting as a business owner. Make employees and suppliers earn your trust before according it to them regularly. Openly discuss theft with your employees, and make sure the people in charge of your warehouses and stockrooms are held accountable for shrinkage.

To be fair, though it’s not just employees who cause shrinkage. Vendor fraud reportedly accounts for 5 percent of retail shrinkage.

Make sure you aren’t taking deliveries and inbound shipments for granted. Always read and file delivery documents and encourage employees to be constantly aware whenever deliveries arrive.

2. Incorrect Location

incorrect bin location

It’s quite common for inventory discrepancies to result from products ending up in the wrong location. And the more SKUs you’re dealing with — especially if some of them look similar in size and packaging — the more likely some of your inventory will become misplaced.

There are two basic types of misplaced inventory. First, it’s possible that the items were entered into the system upon arrival at the warehouse, but sent to the wrong aisle, bin, or rack. Second, if you have a retail floor, it’s possible that a customer picked up an item, decided he or she didn’t want it, and replaced it in a different location.

Incorrect location is one of the primary expressions of inventory discrepancies, so all your employees should remain aware of this and understand the value of accurate placement … both in the warehouse and on the floor.

3. Human Error

“Discrepancies follow the life of the product,” points out Tom Dziersk, CEO of a real-time supply chain executive technology provider. “If an inbound shipment is incorrectly scanned or counted, the inaccuracy will follow the product until it is shipped out at the other end of the fulfillment cycle.”

Although many things can lead to incorrect inbound receiving, the fact is that human error is often one of the culprits. If you can train your employees better to respect the importance of receiving accuracy, you can significantly reduce the chances of human errors that lead to inventory discrepancies down the road.

It’s also worthwhile to note that human error can cause a discrepancy at any point along the supply chain, but receiving is one of the major problem areas for most companies in the electronics industry. If you identify other points at which human error may be having a quantifiable impact, you’ll obviously have to deal with those problems as well.

4. Inadequate Return Policy

A substantial problem area for many companies originates with an inadequate or vague return policy. If a product is returned but isn’t given the right disposition code when it’s placed back into inventory, you won’t have an accurate record of the return. This can create a lot of confusion if it happens many times.

Make sure employees understand how to input returns into the system and they are proficient at applying accurate disposition codes before placing items back on the floor or storing them in the warehouse. There can certainly be pressure to get returns handled swiftly — especially during busy sales seasons — but don’t let this rush your process. Accuracy is to be desired over speed.

5. Faulty Inventory Management Software

When was the last time you had the perfect amount of inventory in stock for a prolonged period of time? If you’re like most businesses in the industry, maintaining an appropriate stock level is more challenging than you’d like it to be.

That’s because it’s nearly impossible to maintain the right stock levels when you don’t have total and accurate visibility of inventory levels. Though errors related to shrinkage, wrong locations, human errors, and inadequate return policies are all major factors, the truth is that having the wrong inventory management solution in place could be the biggest of all.

In order to stay on top of inventory and avoid stockouts, overstocks, and discrepancies, you may need to move to a system that allows for enhanced visibility, cycle counting, and proper management of each and every SKU — whether you handle 20 or 20,000 of them.

Contact QStock Inventory Today

At QStock Inventory, we understand the importance of maintaining accurate inventory levels in the competitive electronics industry. That’s why we work tirelessly to provide industry-leading inventory management and inventory control software that allows for enhanced visibility and fewer inventory discrepancies.

If you’re interested in doing away with archaic inventory management approaches and implementing modern techniques that allow for total visibility and accuracy, then you need QStock. Contact us today and we’d be happy to provide you with more information.

Justin Velthoen

Justin Velthoen

Justin Velthoen has 20 years of supply chain experience, from food distribution to manufacturing, to systems management and implementation. His primary focus is helping businesses realize the cost savings directly to their bottom line.

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