How to do a Proper Year End Auto Parts Inventory Count

  Mike Bachara   |     Nov 25, 2021

How to Do a Proper Year end inventory

As the year comes to a close, many companies are planning for their year end. To help you on your way, here are three steps to conducting an effective year-end physical inventory count in your parts department and some common errors to avoid.

#1 - Train your staff

Ensuring your employees are properly trained is the first step to an effective year-end inventory count.

While inventory counts may seem straightforward, there are many mistakes that can be made, which could negatively affect your inventory counting accuracy. These could include:

Incorrect unit measure

An incorrect unit measure error occurs when the unit of measure in the inventory management system differs from the unit used during the physical count. Hose, wire and similar parts are a major culprit for this type of error - you counted in inches, but the inventory system uses feet. Bulk fluids can also cause incorrect unit measure errors.

Make sure you refer to the unit used in the inventory management system before counting each part to help eliminate this error.

Incorrect part number

An incorrect part number error occurs when you count a part, assuming it has a different part number than it really does. The resulting error will affect two parts – the part you thought it was will have a higher count and the part it is will have a lower count.

This error can be prevented by organizing bins and using proper labels (see step two), as well as ensuring the numbers are verified on each piece before counting.

Prepaid or pre-billed parts

Counting prepaid or pre-billed parts during a physical inventory will result in an overage in the amount of those parts. Make sure to exclude these parts by making sure to label those parts as “do not inventory, or DNI” prior to counting.

Consignment inventory

This error occurs when counters accidentally count consignment inventory. This error occurs less frequently within the parts department, but your team should be aware of it. As with the previous error, if you do stock consignment inventory, mark it as DNI to avoid confusion.

Improper cut-off

An improper cut-off error occurs when new inventory is counted as part of the physical count, but the invoice was not yet entered into the system. Upon reconciling the physical count with the quantity in the system, it will appear you are short. Once the adjustment is made and the invoice is entered, you will be over by the same amount you made the adjustment for.

To ensure this error does not occur, properly mark and exclude unentered inventory from the count.

WIP parts

A WIP error occurs when parts are currently being installed on a vehicle but have not been counted or they have not been associated with a job in the accounting system. This usually indicates a process error within the parts department and can cause inventory discrepancies.

To avoid this error, be sure that open work orders with parts that have not been entered in the system are counted during the physical inventory.

#2 - Organize

Once you have ensured your employees have the necessary skills and understanding to conduct an accurate year-end inventory, you want to be sure your inventory is organized and ready to be counted.

While most automotive dealerships do their best to maintain an organized inventory throughout the year, parts can be misplaced or sorted out of order. If you are one of the many who need to organize their inventory, start by ensuring bins, shelves and packaging are properly labelled, organize the same parts in one place, whenever possible, and avoid putting parts that look too similar close together.

#3 - Count

Now that your inventory is sorted, it is time to start the physical count.

While it may be best to perform your count after hours, it isn’t always possible. If you must count during work hours, be sure to communicate with other departments, such as service and receiving, to ensure that they know their roles and the proper procedures. 

You also want to let all of your employees know not to move parts, unless they are being sold. In this case, they will need to be properly recorded as sold after you have counted.

If you need assistance with your year-end inventory count, consider hiring a third-party inventory management company. At Pro Count West, we have the skills and expertise needed to conduct your inventory count accurately and with minimal disruption.

Get a quote today

 

Guide to Optimizing Inventory MGMT

By Mike Bachara

Mike Bachara | Owner of Pro Count West
Mike Bachara | President Pro Count West

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