Methods of Stock Verification
Stock verification is the process of counting, weighing, and measuring items currently held in stock. It is
an important warehouse procedure, as it provides accurate inventory counts and helps you adjust
inventory value in your company’s books.
Physical stock verification
Physical stock verification involves the same process as conducting an annual physical inventory, as
discussed last module. This verification method involves physically counting all items in your warehouse
by hand. While it can be incredibly time consuming and disruptive, physical verification is an important
warehouse process.
The best way to accurately identify the amount of any given SKU you have on hand is to have staff
conduct a physical count, without relying on computerised printouts or results. Completing this type of
verification also helps you identify the source of loss, fraud, or theft.
Physical inventory counts may not always help identify the source or cause of theft and loss. However,
counts like these can help you figure out which products are prone to inventory control issues, giving
you a chance to keep a closer eye on them in the year to come. For example, if you notice one particular
SKU is prone to loss issues, you may want to consider alternate and more secure storage methods.
Blind stock verification
This is a unique method of conducting stock verification that is not commonly used in modern
warehouses. Managers bring in third party stock verifiers, hired from an external employment or
inventory management agency. These individuals are told the location of the stock they must count, but
are given virtually no other information. Things like codes, descriptions, and expected balances are
withheld. The aim is to ensure a more fair and accurate stock count. In reality, it often results in
confusion, miscounts, and other verification errors.
Most modern warehouses put an emphasis on being well organised, with clearly labelled shelving units
and stock that is readily identifiable. Blind stock verification relies on the warehouse’s ability to hide
details about the product from counters. Approaching verification counts blindly is just not possible in
today’s warehouses, for good reason.
Periodic Stock Verification
Periodic stock verification is very similar to completing an annual physical inventory. The only difference
is that periodic verifications happen more than once a year, but usually less than four. The value of the
stock you hold is determined by shutting or slowing down picking processes and physically counting
each item on hand. Employees then compare the totals with what computerised records indicate should
be on hand. Discrepancies are noted at this time.
This type of inventory verification is a very in-depth process. Current discrepancies are compared against
the last inventory count, to look for and identify any loss or theft patterns. Some stock fluctuates in
value depending on the date or the time of year.
Your accounting department determines the value of your warehouse stock as of the date it was
physically counted, making the timing of inventory counts of particular importance to your entire
company. Be sure you consult with upper management and your accounting department in advance of
selecting periodic stock verification dates.
This type of inventory management solution is best for smaller warehouses. You do need to be able to
shut down operations for at least a few days while inventory counts are completed. No picking,
receiving, or dispatching can occur during this time. Companies that conduct periodic stock verification
more than twice a year tend to be small in size, with warehouses that do not store a large variety of
SKUs.
Perpetual Stock Verification
This inventory control method combines physical verification and cycle counts to form one verification
approach. Each item in a warehouse is counted once per year, but inventory is completed on a
perpetual basis. It still requires that the sections being counted shut down, but this can be done to
minimise the impact on your warehouse operations as a whole. The biggest appeal to this type of
verification method is that managers do not need to suspend entire operations.
The verification schedule is set out in advance; typically, a warehouse manager or management system
determines the schedule approximately six months to a year in advance. This type of verification system
still makes it hard to find the precise source of any stock theft, but it does give you a chance to track
which products are prone to loss.
Who Verifies Stock?
Deciding who should be in charge of verifying stock is a pretty big decision. Managers have three main
options available to them. One way to approach this process is to have your staff complete the inventory
counts for you, using a partially blind method. The benefit is that you do not need to worry about
bringing in third party workers or paying additional staff. The drawback is that having your own staff
complete the counts may result in further loss.
For example, if one particular employee is stealing items off the warehouse floor, they may fudge the
record counts if put in charge of counting that particular section.
Some warehouse managers bring in third party inventory counting companies to complete verification
for them. This does slightly dip into your budget, but often pays off in the long run. It does reduce the
risk of inaccurate counts by improperly trained staff. It also means that if one of your employees is
stealing, they do not have the opportunity to cover their tracks.
A third option is to have permanent stock verifiers or internal auditors on staff who can conduct these
reviews as part of their job description. While this is the preferable approach, it is not always possible in
smaller warehouses.
Managers can then decide whether or not to complete cycle counts on that particular product in the
intervening months before the next inventory, to more precisely pin down the time and nature of the
loss of theft.
