In this article, we explore what receiving inventory is and why it's important. We also share our 7-step process for improving it. Read on to learn more.
Receiving inventory refers to the process of taking physical custody of goods or products delivered to a business and verifying their quantities and conditions. This process ensures that the order matches what was actually sent and helps maintain accurate stock levels.
Example: At Green Grocers, when a shipment of fresh fruits arrived, the staff diligently unloaded the crates and cross-referenced the quantity and quality of the produce with the order list. This process of taking in and verifying the goods is known as receiving inventory.
Receiving inventory is a critical process in supply chain management and operations for several reasons. Let’s explore some below:
Ensuring that what you receive matches what was ordered is paramount. Mistakes can lead to financial losses, incorrect product listings, and customer dissatisfaction.
Properly received goods often mean that you're only paying for what you've actually received. This can prevent overpayments and ensure accurate accounting.
Accurate receiving helps maintain updated inventory levels. This is essential for reordering processes, avoiding stockouts, and ensuring optimal inventory turnover rates.
When you know what's coming in, you can plan better for storage. This is essential in environments like warehousing where space can be a premium.
The receiving process often includes checks for damaged or defective items. This can prevent poor-quality items from entering your inventory or reaching your customers.
Properly managed receiving processes can identify and prevent potential theft or pilferage.
Logging received items ensures there's a paper trail (or digital trail) for every item. This can be essential for warranty claims, returns, recalls, or any other situation where you need a historical record of items.
A streamlined and effective receiving process can speed up the operations of a warehouse or store to ensure that items are quickly and efficiently processed and made available for sale or distribution.
In retail or direct-to-consumer businesses, accurate receiving leads to accurate inventory levels. This means that when a customer orders a product, it's in stock and ready to be shipped which leads to better customer experiences.
In some industries, such as food or pharmaceuticals, receiving processes might have regulatory requirements to ensure product safety or traceability. Proper receiving ensures compliance with such regulations.
Use our 7-step receiving inventory process to effectively optimize your inventory. Simply follow the steps below:
Before receiving inventory, the receiving department needs advance notice from purchase orders or supply chain schedules. This ensures adequate resource and space allocation for the upcoming delivery.
Example: At "GlimmerTech Electronics," the warehouse manager was informed about an upcoming shipment of new smartphones based on the purchase order. This heads-up allowed the team to free up the necessary storage space and have manpower ready for the shipment's arrival.
As the inventory arrives, it is physically unloaded from the delivery truck or container. It's essential to handle items with care, ensuring they are not damaged in the process.
Example: "FreshValley Farms" received a truckload of organic produce from their farmers. With a dedicated team at the dock, they carefully unloaded crates of vegetables and fruits, ensuring none got bruised or damaged.
Once unloaded, cross-reference the items received with the shipping manifest or packing list. This step ensures that the quantities and items match what was ordered.
Example: Upon the arrival of a large consignment of imported wines at "Vine & Dine Cellars," the staff cross-referenced each wine crate with the provided shipping manifest. They verified that the number of wine bottles in each crate matched the ordered quantity.
Thoroughly inspect the delivered items for any damages, inconsistencies, or discrepancies. Any damaged items should be documented and reported immediately to the supplier.
Example: "Stellar Ceramics" received a batch of bespoke porcelain vases. The receiving team meticulously inspected every piece and found a couple with hairline cracks, which they promptly documented.
After verification, update the company’s inventory management system or database with the new items. This helps in tracking and maintaining accurate stock levels.
Example: "GearHub Sports Store" received new athletic wear in their latest shipment. Post verification, the store manager promptly updated the inventory system, ensuring all the new items were correctly added to their stock levels.
Properly store the received inventory in its designated place within the warehouse or storage area. Ensure that each item or batch is clearly labeled for easy identification and retrieval.
Example: "Novella Bookstore" recently got a consignment of best-selling novels. The staff organized these books alphabetically on the shelves and labeled each section, ensuring customers could easily find their desired read.
Finally, communicate the successful receipt and any discrepancies to relevant stakeholders, such as the procurement department or finance team, to ensure accurate record-keeping and payment.
Example: After "AquaPure Waters" received a delivery of new water filter units, the warehouse supervisor informed the procurement team about a minor discrepancy in the delivered quantity. The finance department was also notified to adjust the payment accordingly.
SolarBrew Café, known for its unique solar-roasting method and sustainable coffee sourcing, has multiple branches across the West Coast. As they gained popularity, managing inventory became intricate; here's how they streamlined their inventory receiving process:
SolarBrew Café is anticipating a shipment of fresh coffee beans from their supplier in Colombia. The café's manager has already informed the receiving department, providing them with the purchase order so they can prepare the storage area for the new batch of beans.
Upon the shipment's arrival in a SolarBrew-branded van, the staff gets to work, unloading bags filled with aromatic coffee beans. They handle each bag with care to prevent any spillage or damage to the beans.
The receiving team cross-checks the delivered bags against the shipping manifest, ensuring that the amount and type of coffee beans match the café's order.
While inspecting, the team finds a couple of bags that appear to be slightly torn, risking contamination. They document these bags and set them aside for further assessment.
With verification done, the café's inventory management software is updated to reflect the addition of fresh coffee beans, ensuring the café keeps track of its stock.
The fresh coffee beans are then stored in a temperature-controlled room. Each bag is labeled with details like the roast date, bean type, and source for easy identification during the brewing process.
The café manager is informed about the successful receipt of the coffee beans, including details about a couple of torn bags. The supplier will be notified, and arrangements will be made either for a return or a discount on the next order.
We hope you now have a better understanding of what receiving inventory is and how to optimize it to ensure accurate stock levels, prevent losses, and maintain a smooth and efficient operational flow in a business.
If you enjoyed this article, you might also like our article on receipt of inventory or our article to determine if inventory is a capital asset.
