Originally published on August 30, 2022
Last updated on March 6, 2026
How to Take Physical Inventory
As the retail industry continues to grow, maintaining a good stock of your products is crucial for success. Having enough supplies on hand keeps both customers and employees happy. And the best way to keep track of your on-hand items is with thorough inventory counts. With the right inventory strategy, you avoid product shortages and ensure […]
As the retail industry continues to grow, maintaining a good stock of your products is crucial for success. Having enough supplies on hand keeps both customers and employees happy. And the best way to keep track of your on-hand items is with thorough inventory counts. With the right inventory strategy, you avoid product shortages and ensure inventory accuracy.
Physical inventory counts consist of counting your in-store products in person. Using a mobile device or pen and paper, employees count each product and record tallies manually. But sometimes, this procedure is tiresome or stressful for employees. Abiding by a detailed plan lets you and your employees complete counts without added stress.
Here is a basic overview of how to take physical inventory.
Steps for Taking Physical Inventory
Following a thorough blueprint for physical counts of inventory helps ensure correct completion. Without a plan, you might miss an item or go over your time estimates. And, having a solid checklist is a great way to keep employees motivated and on task.
Here are six steps to follow for taking physical inventory.
1. Plan Ahead
The most thorough inventory counts are planned in advance. Depending on the size of your business, taking stock of your inventory could take weeks. And in many cases, you have to take counts outside of regular business hours. Plan ahead for your physical inventory with these recommendations:
Pick the best date: The most crucial first step is selecting a time for your inventory count. Be sure to plan for dates that suit your employees well. When in doubt, organize more time than needed. That way, if you run over initial time estimates, you can still stay on track.
Communicate with everyone: Notify your employees and other necessary third parties of your upcoming inventory date. If possible, tell them about the time weeks in advance so they can plan for it. You could also postpone deliveries around that time so they won’t interfere with your count.
Review current inventory: Before the big day, take time to inspect how the stock currently stands. Check that the items are in the right condition and not missing any vital information. Complete any last-minute labels to make your products ready for counting.
2. Map Out Your Floor
Next, you should create a map of the inventory floor. Whether you use a preexisting blueprint or draw your pictures, provide employees with an overview of the stockroom and what they need to count. Make sure to label all shelves, racks and displays so that workers avoid any confusion during the process.
It’s also a good idea to create categories at this stage. Group your items by product type to make them easier to keep track of. For instance, you might separate products by shirts or shoes if you run a clothing store. Be sure to identify the categories’ locations on the according map.
3. Train Your Employees
You want to make sure your employees complete the inventory correctly. If not, you receive inaccurate data and lose precious time. To combat this, give your employees high-quality training. Before the inventory date, you should provide employees with a thorough explanation of how to complete their counts. Give them a demonstration or time for a practice run. Try creating a detailed list of the process so employees can refer to it during counting.
4. Count
When the inventory date arrives, you can begin counting. Many companies use a pairing method, where two employees work together to complete the job. One worker takes a physical count of the items, while the other tags the products with information like location, description and quantity. Make your way through your stock, and be sure to account for all categories. Have a supervisor nearby for any questions or concerns during the counts.
5. Recount
Once you complete your initial inventory, you should recount a few sections to check for inaccuracies. Recounts can be completed a few days after the first logged inventories. If you find discrepancies between your tallies and the recorded tallies, it’s best to perform a complete recount of all sections.
You can also appoint a data entry team at this stage to look over the inventory results. They can check for errors in the data and alert you as needed.
6. Analyze Your Reports
After your count and recount, it’s finally time to analyze your findings. It’s best to compare your physical inventory counts with already recorded inventory data. If there are disparities between data, it’s time for an action plan. Maintaining inventory accuracy keeps your business in good health and prevents financial implications. So, you should take any discrepancies seriously and plan how you will address these in the future.
Physical Inventory Tips
While physical counts are essential for your business, the process can sometimes seem overwhelming or stressful. Here are more tips for smoothing your inventory counts:
Try new technologies: Using pen and paper is a trusted inventory method, but it can lead to human error. Try using mobile barcode scanners or inventory management software to streamline your process. These technologies reduce human error and usually speed up the entire count.
Select trusted staff: Depending on the size of your business, you might not need every employee to help with counts. Try to pick employees with prior experience in inventory or keen attention to detail. That way, you ensure hardworking individuals complete the task and reduce the risks of errors.
Reward your employees: Inventory can be a draining task, no matter the business. Show your staff your appreciation by providing refreshments or fun music during and after the job.
How Finale Inventory Can Help
Finale Inventory has been a leader in inventory management solutions for years. We collaborate with growing businesses and provide customized inventory systems. Our high-quality system streamlines your inventory processes and analyzes how you can improve.
We offer a cloud-based inventory management system to assist with your physical inventory needs. This online system is cost-effective, secure and efficient. Whether you need help with inventory auditing, managing barcodes or anything in-between, our inventory management program can assist you.
A few more benefits of our cloud-based inventory program include:
Centralized management: Keep all of your critical information in one secure location with our management capabilities. Our inventory management system allows you to view updates at any time. Or, our warehouse management systems help you track warehouse proceedings, from transfers to audits.
Purchasing capabilities: Finale Inventory offers high-quality purchasing options to smooth your inventory process. Easily purchase more materials or reorder products with just a simple click. We also offer purchasing analysis, advising you on the best time to reorder for maximum revenue.
Barcode generation and tracking: Having accurate barcodes is one of the most important inventory components. Our system makes generating barcodes as simple as inputting data and pressing print. You’ll be able to create custom codes with preconfigured labels that you can start using immediately and print a wide range of documents that Finale Inventory can help customize for your business needs.
Get in Touch With Finale Inventory Today
If you’re interested in upgrading your inventory processes, contact Finale Inventory today. You can get started with a free trial or demo at no cost.
“The core of maturity, that I see, is starting with a unified view of inventory. I’ve got to be able to accurately represent what do I have, make sure that I know where it’s located so I can get it to my customers quickly.”
— Troy Graham, Descartes
What is the first thing I should fix if I want to scale operations?
Start with a unified view of inventory. The core of maturity starts with being able to accurately represent what you do have and make sure that you know where it’s located to get it to customers quickly. Without a unified view across your warehouses, 3PLs, and vendors, you cannot make the best decisions because you don’t have the best information at hand.
With Inventory Visibility, Businesses Can Make Smarter Allocation Decisions
Once inventory is centralized, businesses can move from reactive updates to intentional allocation. They can decide how much inventory to expose to each channel, when to use buffers, which marketplaces need extra protection, and how seasonality or campaign performance influence availability.
Once I know what inventory I have, how should I decide where to make it available?
Inventory allocation should reflect where orders are coming from, where marketing is working, and which channels carry the most risk. Once you know what you have and where it is located, you can think more strategically using centralized inventory to make prioritization happen automatically. One fertilizer company lost a little over 5,000 orders in one weekend because someone manually uploaded the wrong available inventory to Amazon.
Better Inventory Data Improves Planning, Purchasing, and Growth Bets
Better visibility turns inventory data into a planning tool. With insight into sales velocity, inventory levels, vendors, and channel performance, businesses can make more informed replenishment decisions, avoid overbuying, and test new product lines or vendor-supplied inventory without taking on unnecessary risk.
“You have to have unified inventory to know how to price your products just at that basic level. I can’t price my products if I don’t know the true cost to get it.”
— Mike Bernico, Flxpoint
How does better inventory data help me make smarter buying decisions?
It lets you measure whether your plan is working before you commit more capital. A key question becomes: “Did my plan work? Am I overleveraged in one place or another?” Centralized systems can also help businesses test new product lines or vendor relationships by looking at sales velocity by channel, allowing them to take risks in a calculated and measured way.
Intelligent Order Routing Turns Inventory Complexity Into Automation
Once inventory and supplier data are reliable, businesses can automate fulfillment decisions. Orders can be routed based on cost, speed, margin, location, warehouse priority, vendor fallback, split-shipment rules, or customer expectations. This helps hybrid fulfillment scale because every order does not need a manual review.
How do I decide the best way to fulfill each order?
There is no single answer, which is why order routing needs to account for the context of each order. Intelligent order routing is not just sending an order to someone who has stock; it is taking each and every order and treating it like its own unique use case. Depending on the order, the business may prioritize speed, margin, an internal warehouse, vendor fallback, or preventing split shipments.
Supplier Inventory Sync Extends Inventory Beyond the Four Walls
For hybrid fulfillment to work, supplier inventory needs to become part of the operating model. Supplier sync does not always require advanced technology; it can happen through automated files, FTP, email, APIs, EDI, or ecommerce storefront integrations. The key is replacing manual updates with automated, reliable supplier data.
Can supplier inventory really be treated like part of my own inventory?
Yes, but the goal is not necessarily to force every supplier into a complex integration. Real-time supplier sync can be defined as any way to get an automated update from a supplier, such as Google Sheets, email, FTP, API, EDI, or ecommerce storefront connections. The key is that accurate supplier stock is foundational. If you don’t have an accurate view of what is in stock with your suppliers, you cannot tell your sales channel accurately what’s available.
Exception-Based Workflows Keep Humans Focused Where They Matter
Automation does not remove people from the process. Mature operations let technology handle the routine majority while humans focus on exceptions, such as high-value orders, fraud risk, compliance requirements, restricted products, export rules, or unusual fulfillment scenarios.
If my business has special cases, can automation still work?
Yes. The point is not to automate every possible decision; it is to automate the routine work and surface the exceptions. Businesses should not have to look at every single order. Instead, technology can highlight high-value orders, risky locations, or compliance requirements. The goal is to take care of the 80% of workflows that are obvious while still allowing human review when specific exceptions arise.
The Right Inventory Technology Should Fit the Business, Not Overwhelm It
Software decisions should be based on business fit, not popularity, feature volume, or broad “all-in-one” promises. Growing ecommerce businesses should identify their highest-impact bottleneck, prioritize what matters now, and choose technology that is right-sized but flexible enough to support future phases of growth.
How should I choose software without overbuying or picking the wrong system?
Start with your priorities, not the biggest feature list. Avoid an all-in-one system that claims to “do everything under the sun” and look for a “best of breed approach” with systems that can scale as you add channels or vendors. The practical advice is to stack rank what matters now, make sure the system can support future phases, and choose technology that fits your business rather than overwhelming it.
How to Scale Ecommerce Operations Beyond Spreadsheets
For many growing ecommerce businesses, Finale and Flxpoint work together as a practical answer to these challenges. Finale helps centralize and manage internal inventory, purchasing, warehouse operations, and stock visibility, while Flxpoint helps connect vendor inventory, automate supplier sync, and route orders across hybrid fulfillment networks. Together, they give businesses a best-of-breed way to improve inventory accuracy, reduce spreadsheet work, and scale fulfillment without forcing every process into a one-size-fits-all system.
Ecommerce Fulfillment Operations FAQ
What Is Ecommerce Fulfillment Operations?
Ecommerce fulfillment operations are the processes that move an online order from purchase to delivery. This includes managing inventory, syncing product availability across channels, routing orders to the right warehouse, 3PL, supplier, or vendor, and making sure the customer receives the right product on time. As discussed in the webinar, fulfillment is no longer limited to “what’s in my warehouse these days”; growing businesses may rely on internal warehouses, 3PLs, marketplace fulfillment services, and supplier inventory at the same time.
What Are Ecommerce Fulfillment Operation Examples?
Examples of ecommerce fulfillment operations include updating inventory across Shopify, Amazon, Walmart, and other sales channels; allocating inventory to specific marketplaces; sending orders to an internal warehouse, 3PL, or vendor; syncing supplier inventory through files, APIs, EDI, email, or FTP; replenishing warehouse stock based on sales velocity; and flagging exceptions such as high-value orders, compliance requirements, or restricted products. In the webinar, the speakers also discussed hybrid fulfillment examples where a business may fulfill some products from its own warehouse and use vendors as a fallback or extension of available inventory.
How Can I Track My Inventory at an Ecommerce Fulfillment Center?
The best way to track inventory at an ecommerce fulfillment center is to create a unified inventory view that shows what is available, where it is located, and how that inventory connects to each sales channel. That means tracking inventory across internal warehouses, fulfillment centers, 3PLs, marketplace fulfillment programs, and supplier locations instead of relying on disconnected spreadsheets. The webinar emphasized that businesses need to “accurately represent” what they have and know where it is located so they can get products to customers quickly.
How Can I Connect My Inventory to My Supplier?
You can connect supplier inventory through several methods, depending on what the supplier supports. The webinar discussed low-tech and advanced options, including automated Excel or CSV files, Google Sheets, email updates, FTP servers, APIs, EDI, and direct connections to ecommerce storefronts such as Shopify, BigCommerce, or Magento. The key is to ask suppliers how they share inventory today, then use a system that can automate that data flow instead of manually copying supplier inventory into spreadsheets.
What Is Ecommerce Order Routing?
Ecommerce order routing is the process of deciding where an order is fulfilled from after a customer buys. In a simple operation, every order may go to one warehouse. In a more complex or hybrid fulfillment model, the best fulfillment source may depend on inventory availability, shipping speed, cost, margin, customer location, warehouse priority, vendor fallback rules, or whether the order should be split. The webinar described intelligent order routing as treating each order like its own use case, so businesses can automate the best fulfillment decision without manually reviewing every order.
