Inventory in the warehouse

What does inventory mean in the context of warehouse logistics?

At its core, the inventory is the physical inventory of all assets of a company at a certain point in time. For warehouse logistics, this means the systematic recording of all inventories – i.e. raw materials, auxiliary and operating materials as well as finished and unfinished products – by counting, measuring or weighing. Unlike pure accounting, which primarily  captures the value of inventory, logistical inventory focuses on physical reality:

• Quantity: The exact quantity, weight, or volume.
• Condition: The quality of the goods (e.g. undamaged, best-before date).
• Storage location: The exact location in the hall (e.g. aisle 05, shelf 12, level 3).

The inventory is legally anchored in the German Commercial Code (HGB, § 240) and serves as the basis for balancing. For the logistics company, however, it is above all the most important tool for ensuring inventory accuracy.

Why is inventory so crucial for the operation of a logistics property?

High inventory accuracy is the backbone of any efficient warehouse. Inventory is the process that verifies and restores this accuracy. Their importance for the operation of a logistics property can be determined by several points:

• Ensuring the ability to deliver: Only what is physically available and can be found can also be sold and shipped. Inaccurate inventory management leads to out-of-stock situations, costly redeliveries and dissatisfied customers.
• Optimization of capital commitment: Every item in the warehouse ties up capital. A precise inventory reveals "slow-moving items" and excess stock. This makes it possible to clean up the stock assortment and free up tied-up capital.
• Efficient use of space: The inventory provides data on which items are moved and how often. This information is crucial for the layout of the warehouse (slotting) and the optimal use of expensive storage space. High-speed ones belong to the front, slow-moving ones can be moved to less accessible areas.
• Detection of shrinkage and process errors: The difference between the target stock in the Warehouse Management System (WMS) and the counted actual stock (inventory difference) is a critical indicator. It uncovers problems such as theft, damage or systematic accounting errors in incoming or outgoing goods.

What inventory procedures are there in practice?

The choice of method depends on the type of stored goods, the technological equipment of the warehouse and the operational requirements.

1. Key date inventory: This is the classic method in which the entire inventory is recorded in full on a single, fixed key date (or within a period of ten days around that key date).
• Advantage: Provides a complete snapshot of the entire warehouse.
• Disadvantage: Extremely personnel and time-intensive. Often, a complete or partial closure of the warehouse is necessary, which leads to business interruptions.
2. Permanent inventory: Here, the inventory is not recorded on a single day, but continuously throughout the entire fiscal year. Each storage location is checked at regular intervals (e.g. by cycle counting).
• Advantage: No plant closure necessary, more even workload, high and lasting inventory quality.
• Disadvantage: Requires a reliable warehouse management system (WMS) for seamless recording of all goods movements.
3. Sample inventory: In this mathematical-statistical procedure, only a small, representative part of the stock items is counted. The result is then extrapolated to the total stock.
• Advantage: Minimal counting effort.
• Disadvantage: Only permissible under strict conditions (e.g. in the case of very large stocks of similar articles) and requires approval by the tax office.

The influence of logistics real estate on inventory

The physical nature of the hall has a direct influence on the efficiency and accuracy of the inventory.

• Layout and shelving systems: Wide aisles facilitate access for counting teams and industrial trucks. In high-bay warehouses, the detection of the upper levels without technical aids (e.g. lifting platforms, camera systems, drones) is error-prone and dangerous.
• Lighting: Inadequate lighting in the aisles is one of the most common causes of counting and reading errors.
• Technical infrastructure: Comprehensive and stable Wi-Fi coverage is the basic prerequisite for the use of mobile data acquisition devices (MDE) and paperless, low-error inventory in real time.

Questions & answers from practice

Question: What are the most common human mistakes in inventory and how do you avoid them? Answer: The top 3 human errors are counting errors (e.g. missed units in the second row), identification errors (confusion of similar items) and recording errors (e.g. transposed numbers during manual entry). The best countermeasure is the use of barcode or RFID scanners. These force the employee to physically scan the item and the storage location, which drastically reduces the error rate. Good training and the four-eyes principle (one counter, one controller) are also effective.

Question: How do you deal with differences that have been found? Answer: Every difference must be analyzed. A second, independent count (recount) at the affected storage site is the first step. If the difference is confirmed, the cause must be investigated: Was there an accounting error? Were goods placed in the wrong place? Is the item damaged? Only after clarification will the difference be written off. The aim is to learn from the mistakes and improve the processes.

Digitization as a game-changer for the stocktaking

Modern technologies are revolutionizing inventory and increasing efficiency enormously:

• MDE scanner: Today's standard. They enable barcodes/QR codes to be scanned and the counting quantities to be transferred directly to the WMS.
• RFID technology: Radio tags allow the detection of entire pallets or containers without visual contact, which massively speeds up the counting process.
• Inventory drones: Autonomously flying drones, equipped with scanners and cameras, can detect high-bay warehouses in a very short time – often even at night and without human intervention. This not only increases speed, but also occupational safety.
• Image recognition and AI: Camera systems that use artificial intelligence to automatically detect and count inventory on pallets or shelves.

The most important key performance indicators (KPIs) at a glance

The success of an inventory can be measured. The key figures are:

• Inventory Accuracy: Specifies the percentage of the counted items that matched the target stock in the system.

Formula: (Number of correct positions / Total number of positions) * 100

A target value of >99% is considered excellent.

• Inventory Difference (Value): The value variance between the target and actual inventory. It is often expressed as a percentage of the total inventory value and is an important parameter for controlling.
• Count Duration Per Line: Measures the time it takes to count a single item item (SKU) in a bin. This KPI helps to plan future inventories.