Is a high number of stock corrections an indication of poor process quality?

Supply Chain Café by PICS Belgium & ABCAL 05/12/2024
Author & Moderator: Jan De Kimpe, Logisol Pro, PICS Belgium, KULeuven & ART4L

Lots of companies struggle with a high number of stock corrections expressed as % of locations that need modification upon checking. The café confirmed that this is a sign for poor warehouse process quality.

A correct view on the stock levels is important for customer service, for planning and replenishment reasons, to reduce the administration but especially to comply to financial audit specifications as documented in SSAE 18 SOC1. But which is the correct stock? From a financial, planning and customer point of view this should be the (valued) ERP stock. From a warehousing operating and piloting point of view this is the WMS stock, sometimes with add on WCS stock, as managed per location. But the real correct stock is of course the one that can be physically found on the warehouse locations. Difference can occur between ERP and WMS stock, typically linked to IT integration issues, not correctly mapping stock change transactions between systems. Between the WMS and physical stock differences are usually linked to the warehouse operations and thus the process quality as realized by the resources.

Warehouse processes are typically linked to operators scanning codes and confirming quantities and transactions in real time. Best practice at receiving it to put the best and most knowledgeable resources at this process, have recognizable and identified pallets and items, perform thorough quantity and quality check and perform guided put-away with scanning confirmation. In the outbound process scanning items, locations and handling units help support correct functioning of picking and packing processes, sometimes assisted by weigh checking during or after picking. On top of this we also perform regular stock counting, cycle or wall-to-wall counting also including scanning and counting, sometimes camera supported automated counting. Best practice here is to perform blind counting and if deviance (between borders ?) request a second count of another operator. Validation of corrected quantity is performed by authorized employees before updating the ERP stock.

Despite all of these possible actions still stock errors can occur. Focus of management and mindset of operators also play a role in avoiding stock differences. The main causes for stock difference between physical stock and WMS stock are indeed people linked. During receiving wrong quantity per carton or pallet, wrong identification of pallets, bad checking, counting and registering and wrong location for put-away will cause differences along the warehousing process. Picking is a tedious task requiring operator concentration to avoid errors. Wrong location picked from, wrong item on location, wrong quantity taken will result in later stock corrections. And stock counting is no guarantee for a correct stock, during counting also stock differences are created. If one can get the receiving and put-away right than during storage, on bulk locations, no stock deviances can occur (unless pilferage). Typically errors occur on picking locations. So yes, a high number of locations corrected does give a signal that the warehousing processes and/or operational focus are not under control.

During the peer discussion we also discussed about back-flushing. This is an easy technique to adjust stock levels based on bill of material and quantities of products made, but will surely result in stock differences. Confirming opening new packaging is a way of keeping this stock correct, but resulting in corrections of course.

Does AS/RS integration bring along more stock corrections? Most probably yes because smaller location quantities are more frequently corrected, increasing the number of stock corrections.

Would RF/ID be a solution to avoid stock errors? If can indeed help, but this means that every unit must be serialized and thus unique. RF/ID can then be used in all warehousing processes, but does have some limitations : water, metal, number in (mobile) capturing field and price.

To conclude we can state that despite all the digitalization and automation, one factor still seems to be underestimated: the human element. With accurate inventory there is less concern about stock shortages, and no need to worry about overstocking and thus less safety stock to hold. And one saves time and money, improves efficiency and productivity, and it leads to more loyal customers, among many other benefits.

The key takeaway is that the higher the stock accuracy, the higher the trust—not only internally (among demand planners, procurement, sales teams, etc.) but also with customers.