Ask a distributor how accurate their inventory is and you’ll usually hear “pretty good, maybe 95%.” Then you count. A 60-person parts distributor I worked with ran a full physical count last March and came up 12% short — on $6.2 million of stock, that’s roughly $740,000 of product that existed only on a screen. Nobody stole anything. It leaked out one small error at a time, over four years.
The owner’s first instinct was to blame the system, and his second was to buy a new one. Both were wrong, and realizing that saved him about $180,000 in software he didn’t need.
The three places inventory quietly disappears
We traced the 200 worst discrepancies by hand, and every one of them fell into three buckets. None of it was exotic.
- Receiving shortcuts. A truck pulls in at 4:40 pm, someone signs for 40 cartons, the paperwork said 42. Twice a month, across 60 suppliers, that adds up to thousands of units a year.
- Substitutes on the pick floor. A backordered part gets swapped for the closest match and the paperwork never follows. The customer is happy. The count is not.
- Returns parked in the corner. Nine pallets of customer returns were booked back into stock before anyone inspected them, and about a third were unusable.
What fixed it, and it wasn’t a new system
We brought ERP Consulting in for the counting routine and left the software alone. The fix started with counting more often, not less. Most teams count once a year because it hurts, which is exactly why it hurts.
- Sort the catalog into three groups. The top 200 parts by value get counted weekly, roughly 40 items a day. The middle group monthly. The long tail twice a year.
- Give one person per zone the credit and the blame. Shared accountability across an aisle turns into no accountability.
- Count the shelf, not the screen. If a counter sees “should be 14,” they will find 14. Blind counts only.
- Chase the cause the same day. Every miss over $200 gets a one-line note — wrong pick, bad receipt, damage. After six weeks the top three causes were obvious.
This is where ERP Consulting actually earns its fee, and it’s rarely the part people expect. Nobody needs help switching on a counting screen. They need someone standing next to the receiving crew at 4:40 pm asking why the number drifted.
Day 90, in numbers
Accuracy hit 94% by week six and 98.6% by week twelve. Shrinkage fell from $740,000 a year to under $90,000. The company also stopped paying for expedited freight on parts it thought it owned.
The habit that held it together came out of a follow-up session: every Monday, the warehouse lead and the controller looked at one page — the five worst items from the past week — and fixed the cause, not the count. Fifteen minutes, and that’s the whole meeting.
What surprised the CFO most was that customer service improved instead of slipping. Fewer “sorry, we don’t actually have that” calls, fewer credits, and a warehouse team that stopped getting yelled at every Friday.
Here’s something you can run this week. Pull the last 20 order lines that had to be shorted or substituted even though the screen showed stock. Hand those 20 item numbers to the warehouse and ask for a blind paper count. If more than two come back wrong, your next quarter has already written itself.