Physical Inventory Guide

What is Physical Inventory?

Physical Inventory is the process of counting every part in your warehouse to verify that your system records match what is actually on the shelves. Unlike day-to-day perpetual counts (cycle counting), physical inventory is a comprehensive count of your entire parts inventory, typically performed annually or semi-annually.

ScanIt Parts provides specialized tools and workflows designed to make physical inventory as efficient and accurate as possible, using Chainway C66 or C72 handheld scanners to capture counts and track progress in real-time.

Why Physical Inventory Matters

• Financial Accuracy -- your inventory is a significant asset. Accurate counts ensure your financial statements reflect reality.
• Tax Compliance -- many jurisdictions require periodic physical inventory for tax purposes.
• Order Optimization -- knowing true quantities prevents over-ordering (wasted capital) and under-ordering (lost sales).
• Shrinkage Detection -- physical counts reveal theft, damage, and other inventory losses.
• Customer Service -- accurate inventory means you can confidently promise parts to customers.

Preparing for Physical Inventory

2-4 Weeks Before Count

• Set count date(s) and communicate to all departments.
• Plan warehouse zones/pads.
• Assign counting teams and supervisors.
• Verify sufficient Chainway scanners are available.
• Schedule overtime if needed.

1 Week Before Count

• Run receiving to clear all pending shipments.
• Complete all bin changes and relocations.
• Create inventory pads in your DMS system.
• Set up DMS connection in ScanIt Parts (Create Inventory).
• Download pads from DMS into ScanIt Parts.
• Print count sheets (optional paper backup).
• Test all Chainway scanner devices.

Day Before Count

• Receive all remaining shipments.
• Complete End-of-Day processing.
• Charge all Chainway scanner batteries.
• Brief counting teams on procedures.
• Post signage for any restricted areas.

Count Day -- Before Starting

• Verify no new shipments are being received.
• Put any incoming orders on hold.
• Distribute Chainway scanners to counting teams.
• Provide Inventory Key# to counters (or display QR code for scanning).
• Assign pads to counters.
• Confirm all counters understand the process.

The Scanning Process

Starting a Count Session

1. Open ScanIt Parts on your Chainway scanner.
2. Select Physical Inventory mode.
3. Enter the Inventory Key# provided by your supervisor.
4. Select the pad assigned to you.
5. Begin counting at the first bin in your zone.

Scanning Bins and Parts

1. Scan the bin barcode to identify which bin you are counting.
2. Scan each part barcode in the bin.
3. Enter the quantity for each part.
4. Move to the next bin and repeat.

Zone Planning

Divide your warehouse into logical zones (pads) for counting:

• By Aisle -- each aisle becomes a separate pad.
• By Section -- group related areas together.
• By Manufacturer -- count all parts for one make together.
• By Value -- high-value areas may warrant special attention.

Handling Special Situations

Write-Ins

A write-in is a part found on the shelf that does not appear on the inventory pad. This could be a part in the wrong bin, a new part not yet in the system, or an obsolete part that was never removed. When you encounter a write-in, scan the part and the system will prompt you to add it as a write-in entry.

Misplaced Parts

If you find a part in a bin where it does not belong, scan it where you found it. The system records the discrepancy and it can be corrected during reconciliation. Do not move parts during counting -- count what is actually in each bin.

Parts Not Found

If a part is listed on the pad but you cannot find it in the bin, enter a quantity of zero. The system flags this as a variance for investigation during reconciliation.

Cores

Core inventory (alternators, starters, etc.) is often stored separately. Count cores in their designated area and record them on the appropriate pad. Review core counts separately during reconciliation due to different valuation rules.

Reconciliation

Reconciliation is the process of reviewing variances found during counting, investigating discrepancies, and determining which adjustments to accept.

1. Go to Physical Inventory → Reconciliation in the web interface.
2. Select a completed pad to reconcile.
3. Review each variance (system quantity vs. counted quantity).
4. For each variance, choose to Accept the counted quantity, Reject (keep system quantity), or Recount.
5. Add reconciliation notes explaining your decisions.
6. Submit reconciliation when complete.

When to Accept a Variance

• The counted quantity is clearly correct (you physically verified).
• The part was miscounted previously and the new count is reliable.
• Multiple recounts confirm the same quantity.

When to Reject a Variance

• The counter made an obvious error.
• Recent transactions explain the discrepancy.
• The variance is implausible based on recent activity.

Finalizing the Count

Before posting results to your DMS, verify:

• All pads have been counted.
• All variances have been reconciled (accepted, rejected, or recounted).
• Recounts have been completed and reconciled.
• Management has reviewed and approved the results.

Once reconciliation is complete, the counted quantities are posted to your DMS. The posting method depends on your DMS system.

Counting Speed Estimate

A general estimate is 200-400 parts per hour per experienced counter. A dealership with 10,000 parts and 4 counters might complete counting in 1-2 days, plus time for reconciliation.

Best Practices

• Count what you see -- do not assume quantities.
• Do not move parts during counting.
• Use teams of two for high-value areas.
• Take breaks to avoid counting fatigue and errors.
• Keep scanner batteries charged (have backup batteries ready).
• Address discrepancies promptly during reconciliation.
• Review core inventory separately due to different valuation.