Stocktaking Types: What Stocktaking Methods Exist and How They Work

Aug 14, 2024 // Daniel Schulteis

Stocktaking is an essential part of any company that stores goods or materials. It serves to determine the actual stocks and to check the book inventory. The obligation to carry out a stocktake arises from the German Commercial Code (HGB), which stipulates that companies must carry out a stocktaking at least once a year. Accurate and regular stocktaking is crucial to keep track of inventory levels, detect shrinkage and theft and ensure financial accuracy.

Whether large or small, choosing the right stocktaking method can make the difference between efficient stock management and chaotic stock. This blog post explains the different stocktaking types and highlights the advantages and disadvantages of each. It also lists important considerations for choosing the right stocktaking method.

What Types of Stocktaking are there?

There are various types of stocktaking, which differ depending on the method and time. The most common stocktaking types are presented below.

Key Date Inventory

The physical inventory is probably the best known and most frequently used type of inventory. Here, all stocks are counted, measured or weighed on a specific date - often at the end of the financial year. The biggest advantage of the key date inventory is its simplicity. It can be carried out flexibly at any time. However, key date inventory can cause considerable disruption to operations, as the entire business often has to be stopped in order to carry out the inventory. This also requires a large number of staff, which can result in additional costs.

Permanent Inventory

Permanent stocktaking, on the other hand, distributes stocktaking continuously throughout the year. In this method, stock levels are continuously recorded and updated, usually using IT systems. This method does not disrupt ongoing operations and enables regular stock checks. Continuous monitoring means that discrepancies can be identified and corrected immediately. However, permanent stocktaking requires a well-organized system and trained personnel, which can increase the complexity and cost of implementation.

Postponed Inventory

The postponed inventory is a flexible variant of the key date inventory. Here, stocktaking is postponed to a period before or after the actual key date. This flexibility allows companies to better adapt the inventory date to their operating processes and avoid peak times. This can be particularly advantageous in seasonal business areas. However, the postponed inventory requires precise coordination with the bookkeeping and accounting departments, as the inventories must be updated to the balance sheet date. The planning effort is therefore higher.

Full Inventory

The full inventory records all of a company's stocks at a specific point in time. It is therefore the most comprehensive and accurate method of stocktaking. However, this method is very time-consuming and can disrupt operations considerably, as it requires a lot of staff and careful planning. The high costs and effort involved make the full inventory less attractive, especially for small companies.

Inventory Sampling

Inventory sampling is limited to counting a sample of the stock, from which conclusions can then be drawn about the entire stock. This method is particularly suitable for large inventories and offers considerable time and cost savings. As only part of the stock is counted, the process is quicker and requires less manpower. However, this method is based on statistical extrapolations. This form of stocktaking also causes fewer counting errors and is therefore more accurate than other methods. Selecting the right sample requires in-depth knowledge of statistics and stock management.

Zero Cycle / Cycle Counting

In cycle counting, certain items are counted regularly so that all items have been counted at least once over a set period of time. This method enables continuous stock control and quick adjustments, as the counts can be integrated into the normal workflow. Ongoing operations are not disrupted, which is a major advantage. However, this method requires good planning and organization, which means a higher planning effort compared to other methods. In addition, regular counts are more resource-intensive and require regular staff training.

Simplified Stocktaking Methods

Simplified stocktaking methods include methods such as the fixed value method or group valuation, which aim to reduce stocktaking costs. However, these methods can lead to inaccuracies as they are based on average values or fixed values. They are therefore not suitable for all types of inventories, especially for valuable or highly fluctuating inventories.

However, the most efficient simplification method is the inventory sampling method. This method saves even more time and costs in comparison and avoids warehouse closures and production stops. It also reduces potential counting errors and thus improves stock quality.

Selecting the Right Stocktaking Type

Choosing the right stocktaking type depends on many factors. The size and structure of the company play a decisive role here. Small companies with manageable inventories can often get by with a physical inventory as of the key date or a postponed inventory. Larger companies, on the other hand, often benefit from permanent stocktaking or cycle counting so as not to disrupt operations and to have continuously accurate stock levels.

The type of stock is also an important factor. High-value stock requires more accurate and frequent checking, which is why perpetual inventory or cycle counting can be useful here. For large quantities with a low individual value, on the other hand, inventory sampling may be a suitable method.

The technical equipment of the company is also crucial. Companies with well-equipped IT systems can implement a permanent inventory or cycle counting more easily. Companies that still work predominantly manually are more likely to use a periodic inventory or a postponed inventory.

Practical considerations such as costs and resources also play an important role. The choice of inventory type should also take into account the available financial and human resources. Staff training and availability are also crucial for the successful implementation of the inventory. There should be as little disruption to operations as possible and the method chosen should be flexible enough to adapt to changes in the business environment.

What are the Advantages of Using Software for Stocktaking?

The use of software makes stocktaking much easier and more accurate. For example, with our INVENT XPERT inventory sampling solution, you can check the quality of your stock based on suitable and prescribed mathematical-statistical procedures using samples, making a full inventory unnecessary. This avoids the annual state of emergency in the warehouse and also saves time and money. In addition, INVENT XPERT can be connected quickly and securely thanks to simple interfaces and offers the user familiar inventory processes in the familiar warehouse inventory system.

Conclusion

Choosing the right stocktaking type depends on many factors, including the size of the company, the industry and the technological equipment. Each stocktaking type has its own benefits and challenges and it is important to choose the method that best suits the individual needs of the business. With the right planning and the use of inventory software where appropriate, stocktaking can not only be a necessary obligation, but also a valuable tool for stock management and increasing efficiency within the company.

Which methods do you use to carry out your inventory quickly, cost-effectively and, above all, efficiently? Please feel free to send me an e-mail.

If you would like to find out more about how you can optimize your inventory processes, visit our inventory sampling website: