Understanding Physical Inventory Management

To account for all items, organizations conduct a physical inventory, in which items are physically counted on a particular date and time. Accurate inventories help you to:

• Reduce backorders.

• Reduce monetary amounts that are invested in inventory.

• Reduce downtime that is attributed to stock outages.

• Increase on-time deliveries.

To reconcile the online inventory records and physical inventory, you can use both:

• Cycle counts

  A cycle count is the item-based method of counting inventory. Using the cycle count process, you select items to be counted at various intervals throughout the year.

• Tag counts

  A tag count is the location-based method of counting. It is designed for an end-of-year, wall-to-wall physical inventory.