Three Types of Inventory Service
During the last twenty years there has been a great push towards a lean inventory system. This emphasis on inventory may have been started by Japanese companies who focused on having inventory just-in-time. This allowed them to sell quality products for less because they were saving on typical inventory costs like stock-out and holding costs. Today there are a myriad of inventory services available to make sure your organization is holding the right amount of inventory.
Counting Services
There are organizations out there that specialize in counting inventory. This is especially important for companies who run on a periodic inventory system (a system that calculates cost of goods sold by adding beginning inventory to purchased inventory and then subtracting ending inventory). If the ending inventory count is off for these types of companies it can lead to drastic differences in cost of goods sold which of course affects net income.
Organizations definitely want to make sure that their year-end inventory count is correct. Not only the stakeholders rely on these numbers, but if the company is publicly traded, this number will likely be audited. As a general rule of thumb auditors trust work done by third parties more than they trust work done by the company doing the count. This may be reason enough to consider hiring an outside party to count your inventory.
I should mention that companies running on perpetual inventory systems (constantly updated inventory counts) will also occasionally want to count inventory. Even if your organization constantly updates the books when inventory is received and sold, there is still a chance that the actual inventory count is off due to shrinkage.
Rental Equipment Inventory Services
Another inventory service provided is that of renting your company the equipment to perform the count internally. This can save your company money because you don’t have to pay for the outside labor; you’ll still have to pay your employees of course. One disadvantage of just renting the equipment is that your auditors likely won’t trust the information quite as much. This can lead to more intensive audit testing of inventory which could lead to higher auditing fees.
Consulting Services
There are some consulting firms out there that specialize in inventory management. These firms can assist you in calculating the optimal reorder point. They can also try to show you other ways to reduce inventory carrying costs. Probably the biggest advantage of hiring an outside inventory consulting firm is that these firms have a wealth of experience. They will be able to help you analyze the different types of inventory control systems, as well as choosing software that will be a good fit for your company’s inventory situation. Finally a consulting firm may be able to hold your company’s hand through the process of moving towards a just-in-time system where you work closely with your vendors to ensure inventory levels are exactly where you want them to be.
Carefully watching your inventory levels may be just the ticket for surviving the recent downturn. Companies with heavy carrying costs likely won’t survive. There are inventory service providers available to count your inventory, rent you equipment, and consult you on inventory best practices.
Related posts:
