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Best Practices: How to Conduct a Store Inventory
Best Practices: How to Conduct a Store Inventory
Brian Curtis avatar
Written by Brian Curtis
Updated over a week ago

Taking a full store physical inventory is an essential part of retail operations. Here are some process suggestions, tips and guidelines from Heartland Retail to help you plan and execute your count. For instruction on how to use the Physical Count feature in Heartland Retail, read this article.

The Big Picture

The goal of physical inventory is to count every item in your store once, and only once. The processes described in this guide are only examples. You may find that you need to improvise to suit your needs, and when you do, this goal (to count every item in your store once, and only once) should serve as your "anchor point".

Step 1 - Create a store map ahead of time

The point of a store map is to give you a tool to ensure that you've counted everything. Create a map of your inventory and then divide it up into manageable counting sections, or batches. For example, a store may have sections as follows: Windows, Cash Wrap, Front Right, Front Left, Back Wall, Rounder/Case, etc. The sections will correspond to scanning batches when you do your count. Making relatively smaller sections rather than just a few big ones will make it easier to identify mistakes and check discrepancies.

You can use Google Draw or a similar program to map down to the shelf sections and fixtures in your store. You should make sure every possible place that holds merchandise, on the sales floor or off it, is included in a section of your store map. Don't forget windows, mannequins, under the counter or back room stock. You can number down to every individual fixture and every section of shelves.

Step 2 - Organize the store before the count

This can be done concurrently with Step 1. It is essential to keep the store organized according to the map you created. Be sure every piece of merchandise is clearly included in only one section. Grouping items by brand or department can be helpful for checking discrepancies, but is not essential for getting a correct count. You might use blue painter's tape to section off and number your sections or batches.

Next make sure all items have a scannable barcode. This may take the most time, especially if you have jewelry. This step is so important if you want the count to go most efficiently. It is inefficient to start a scan/count and then come across items in the section that aren't barcoded. It also causes for mistakes in the inventory if you don't handle those items right away (which slows you down). If you are setup to scan UPCs, this step is very easy, but you should still check each item. Print barcode labels from Heartland Retail for any items that are missing barcodes. Arrange items so the barcodes are easy to reach.

Step 3 - Tactics for the Big Event

This section covers tactics for all aspects of executing the count itself. For best results, you should plan these well in advance.

3a. Count teams 

Your count will go smoothly if your scanning team has well-defined roles. Of course, the size of your team will depend on many factors, including the size and complexity of the count, time alloted for the event, and available manpower. For a well-prepared location with 10,000-15,000 scannable barcoded SKUs, a six person team with experienced leadership should be able to complete the count in 4-6 hours. A larger count would require more people - or more time - while a smaller location could be covered with less. It may be tempting to make the count an "all hands on deck" event, but too large of a crew can actually be distracting and contribute to mistakes. What is most important is defining and communicating roles for the team ahead of time.

For the six person roster above, the roles might look as follows:

  1. Team Lead - Assigns sections to scanners, manages the count on Heartland Retail, and reviews discrepancies.

  2. Scanner - Scans sections. Confirm total qty scanned to a quick item count. Re-counts discrepancies.

  3. Scanner - Scans sections. Confirm total qty scanned to a quick item count. Re-counts discrepancies.

  4. Scanner - Scans sections. Confirm total qty scanned to a quick item count. Re-counts discrepancies.

  5. Scanner - Scans sections. Confirm total qty scanned to a quick item count. Re-counts discrepancies.

  6. Specialist Counter - Identifies, researches and counts non-scanning items.

3b. Scanning process

Although barcode scanning is the best way to quickly and accurately capture inventory counts, there are still some pitfalls to be aware of. Taking the time to set up an organized scanning process that's tailored to the type of merchandise you sell will pay off in speed and accuracy at the time of your count. While every store is different, here are some suggestions for handling different scenarios:

  • Smaller boxed merchandise on shelves: Arrange all boxes with barcodes facing out. Start scanning with the leftmost item on the top shelf of each section, then proceed to the right. When you reach the rightmost side of the section, move down to the next shelf and start again on the left.

  • Apparel on hangers/racks: Make sure all barcodes are visible (pull tags for each of reaching the bar codes ahead of time). Slide all items to the left side of the rack. As you scan each item, slide it as far right as possible.

  • Large boxed items/stockrooms: Arrange all items meticulously with barcodes facing out and plan your route around the room before you start. Emphasize neat piles and be sure there is a logic to how one should proceed through the scanning. For example, if you have boxes stacked on pallets, make sure the scanner walks around each pallet the same way. If the room is organized well, this kind of merchandise should be very easy to scan.

  • Small impulse items in bins: Start with an empty basket or box. Remove each item from its impulse bin, scan it, and place it in the basket. When you finish the bin, empty the basket back into it and start the next one. Because they usually exist in large quantities, and because effective tactics differ greatly depending on the specific merchandise, impulse items can take a lot of time to scan. You can mitigate this by assigning your most experienced (and detail-oriented) scanning personnel to this department.

  • Items that won't scan: No matter how carefully you vet your barcodes, there will always be some items that don't cooperate at the time of the count. Provide each member of the scan team with a basket or tote (or area of the store) in which to consolidate these items - if the item won't scan, put it in the basket (or area) and move on. Task one team member with collecting these items and dealing with them in batches.

Step 4 - Reports to review as part of the physical count

  • Negative On Hands - Before the count, you should review your list of items where the quantity on hand of the item is negative. For instructions on how to generate a list of these items, read this article.

    Negative on hand quantities generally fall into three categories:

  • Items on Purchase Orders or Transfers that have physically arrived and been sold but never received in Heartland Retail. These are essential to correct because if those transfers/POs are received after the count is finalized, they will add false on-hand quantities. The product receiving and/or transfer in should be completed before the physical count, even though well afterwards, to ensure the most accurate reporting.  

  • Items for which the origins of its negative quantity cannot easily be traced. You can research this via Heartland Retail's item inventory history feature: Searching Inventory These will be fixed by the count and are a lower priority.  

  • Items whose quantities are legitimately negative. For example, an item that has been sold by one store but needs to be fulfilled out of another store and has not yet been transferred. These negative numbers must be preserved to prevent false positives when the transfer happens. Since Heartland Retail will not accept negative quantities in a Physical Count, you will need to adjust them out after the count is finalized.   

  • Discrepant and open transfers - Review all open, or in-transit item. Make sure all items physical transferred have been transferred in. If you have discrepant transfers, resolve them before you complete the count.

  • Think about receiving cut off - If there is product coming into the store, know if you should count the product or not. If it has been received in Heartland Retail, it should be counted. If it will be received in after the count, it should not be counted.

  • Physical Count resulting discrepancies - When reviewing discrepancies, resulting from the physical, sort the list and address the largest ones first. Look particularly for items that showed several on-hand but zero on the count. This is a very good indication of missed items or sections.

Step 5: Use a check list

  1. Make sure everything is barcoded and labels are easily accessible - goal is to scan quickly. When you come across an item that isn't barcoded, it really slows down the count.

  2. Review your negative on hand report

  3. Create a 'role' list - who will do what during the physical count

  4. Create your store sections, or batches

  5. Plan for items that won't scan

  6. Start the count!

  7. Review your discrepancy reporting in the count feature

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