The Importance of Accurate Inventory

I think everyone will agree that Inventory Management is one of the most important processes for every business that has a stockroom.

But WHY is inventory accuracy so important…?  Because inventory accuracy impacts one of the most valuable assets of a company, CUSTOMERS. Because almost every department within a business is affected in some way or another – from Human Resources, AR, AP, Warehousing, Contract Engineering, Manufacturing, Sales, even Customer Service. In a nutshell, inventory supports customer requests/demands. Without accurate inventory records, client’s requests can’t be met.

Recently, in order to ensure reliability, we did a complete physical inventory to validate our monthly cycle counts. A team of 20 employees dedicated a weekend to confirm that our inventory was accurate. Having accurate inventory records that agree with the product physically on hand has allowed us to meet the customers’ expectations and minimize delivery delays.

Accurate inventory records improve operating efficiencies. Companies can reduce operating costs if inventory records are accurate. Accuracy reduces the number of vendor purchases and reduces employee labor time spent looking for lost/misplaced/never-received parts. Overstocked inventory requires space and capital and often inventory turns/usage are inaccurate – that causes mistakes in forecasting.

Having sufficient inventory on hand helps to reduce lead-time to the customer, something we consider an important value-added service. This has become an important, but delicate, balancing act because we want to support customer demands and needs without having excess or obsolete inventory.

Most companies use their inventory as a collateral base for borrowing money to finance operating needs. Investors rely on accurate financial statements, which include inventory value, and taxation often depends on the value of the inventory (overpayments/underpayment of tax effects net income). Inaccuracies in inventory can have a major impact on the borrowing abilities and investing activities of the company and may indicate a lack of adequate control.

We use a modified supply chain management model which utilizes members across the organization (sales, operation, and accounting) where specialized product line buyer/planners use their expertise to verify inventory accuracy, correct stocking levels and make sure the customer’s needs are met.

The cost of inventory can be one of a company’s largest investments. In our case, we stock thousands of products from Parker HannifinGASTJastramColderBalluff , etc. However, with the launch of our new website we now have access to more than $150 million of hydraulic, pneumatic, electromechanical, instrumentation, along with hose, valve and fitting products through our membership with the DistraNet™ distributor network. Because of that, the investment of time and resources in cleaning up our inventory was not just a good idea… it was crucial to our success. Our custom inventory solutions can be crucial to your success as well. Find out more at

–  Accounting Department

You can count on RG Group for excellent quality and service

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