How to do a Warehouse Audit

Tune Up: Auditing Your Warehouse for Peak Performance

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This “unglamorous” process can uncover hidden problems and opportunities for better warehouse operations.

While there are many new cool technologies for running a warehouse, it is still important to run periodic audits to ensure things are running the way they should, and to look for opportunities for improvement. A warehouse audit is an objective examination of your warehouse from top to bottom. It provides valuable data, including:

  • Identifying opportunities for improvement
  • Eradicating or reducing bottlenecks and inefficiencies
  • Updating and standardizing procedures
  • Evaluating current operations and establishing best practices
  • Ensuring compliance with health and safety standards

While an audit may not be the most exciting task, it’s an important one and key to ensuring your warehouse keeps running as efficiently as possible. Doing an audit not only allows you to keep on top of your inventory, but it’s also a great chance to review your processes, implement best practices, and update your stock control and management processes.

When you have a complex process involving a lot of steps, a checklist is invaluable. Having one for your warehouse audit ensures you have all your bases covered and the process goes much more smoothly. - David Davies Click To Tweet

Most audits will be completed by an independent professional who won’t have any direct connection to you or your business. So, what can you do to prepare yourself for the audit, and is there anything you can do to make the process easier for the auditor? Definitely. Here are seven things for you to consider, which will make the auditing process much easier and much more productive, for you and the auditor.

Related: Supply Chain 2019: Building the Consumer Value Chain

1. Create a checklist

There’s a lot to consider when it comes to auditing your inventory. So – to make sure you cover all bases – create a checklist. This’ll give you and the auditor a thorough understanding of everything you need to do prior, during and after the audit. It’ll also ensure that your results are as accurate as possible and reduce the risk of any discrepancies.

An inventory audit can be quite a big project, so you might want to think about splitting your checklist into categories. Here are a few areas you could consider:

  • Pre-audit
  • Warehouse operations
  • Inventory counts
  • Inventory data
  • Employee feedback
  • Post-audit results

By creating a checklist for each section of the assessment, you’ll help the auditor approach each element more efficiently.

2. Prepare for a review of your procedures

When the auditor arrives, not only will they review your inventory, but they’ll also think about how your processes are being used on a daily basis. To prepare yourself and your employees for this, make sure everyone is aware of the standard procedures. At a minimum, you should aim to have procedures in place to cover:

  • Stock management
  • Stock loss
  • Damaged items
  • Unloading new products
  • Health and safety procedures

As there are lots of processes and procedures to follow in different areas of manufacturing, use this as a guide, but be sure to include all procedures that are relevant to your situation. Review your procedures and formalities well before the audit to make sure you have covered all your bases.

3. Prepare your employees

Your auditor will probably want to talk to your employees and watch them in their everyday work. This is to ensure that best practice is being used and that procedures are being followed correctly.

To prepare your staff for the audit, consider asking them to take part in a short interview with you. A quick interview will help you identify any areas they’re unsure of in advance. Here are a few questions that you might want to ask:

  1. Are you fully aware of all health and safety policies? Give a few examples.
  2. Are there any problems that you’ve come across in the systems we use that affect your ability to do your job effectively?
  3. How do you record lost or damaged items?
  4. How do you report a problem with any of the manufacturing systems?

Your review could highlight  common mishaps. If so, consider delivering some additional training to address the causes of the errors.

4. Familiarize the auditor with the layout of the warehouse

When the auditor arrives, it’s important that they have a sound understanding of where everything is located. To give them a helping hand and speed up the processgive the auditor a tour of the warehouse, showing them exactly where everything is located, how the warehouse runs, and allow them to ask any questions. This’ll help make the whole process flow much more smoothly and faster.

5. Assist with inventory counts

Inventory counts are used to check how much stock is in your warehouse. This is done by collating previous financial records into a count sheet: the sheet identifies how many products you’ve bought, sold, and still have in the warehouse. Auditors will often use inventory counts to discover accounting frauds, so it’s a good idea to do your own checks before the auditors arrive. That way, you can be sure that all your stock is where it should be, and that you can account for any discrepancies.

Related: Optimizing the Modern Enterprise with a Control Tower for CFOs

Generally, a ‘floor-to-sheet’ or ‘sheet-to-floor’ method is used for the counts. Floor-to-sheet involves selecting a product from in the warehouse and checking it on the count sheet. Sheet-to-floor is selecting an item from the count sheet and checking its location in the warehouse. The auditor will do this until all items are accounted for and any discrepancies have been identified.

6. Analyzing the audit results

When the auditor has finished their work, they’ll take some time to review the results. At this stage, it would be a good idea to let the auditor know of any changes you want to make in the warehouse. That way, they can factor in those plans and tailor their feedback accordingly.

The results can be extremely useful to the development of your business, and can help you improve processes in your warehouse. If you’re not sure what you would like to improve following an audit, think about the following:

  • Layout – an audit can help you decide if your warehouse would benefit from a re-organization.
  • Pricing – you might want to think about whether the auditor has any feedback about your costing. This could be the prices you charge your customers, how much you pay for your stock, and even how much you pay to hire your premises.
  • Processes – you might have some manufacturing processes that could be improved. An outside auditor sees a lot of warehouses and manufacturing facilities, and can often recommend new, improved processes.
  • Software – although you might already have an inventory management system in place, your auditor may be able to suggest a newer and more efficient system.

7. Compare the data with previous years

Data from past audits will be extremely useful to your auditor. Comparisons can be made and trends can be identified. When comparing data you should always be aware of any major shifts in inventory due to promotions, holiday schedules, or liquidations. Political, economic, social and technological changes could also have influenced any large changes in the past year. Make sure your auditor is aware of any of these influential factors to ensure that any comparisons are made with this in mind. This will make the data far more reliable.

Managing a warehouse goes way beyond the day-to-day operations, and organizing an audit is one of those things that can have a positive impact on your operations. When done successfully, an audit will help you maximize productivity and efficiency – all the while saving yourself time and money.

You might also like: Supply Chain 2019: Building the Consumer Value Chain


David Davies
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