Inventory Management SOP for Manufacturing

# Inventory Management SOP - Manufacturing

## Purpose
Implement to maintain accurate stock levels, reduce shrinkage, and ensure your inventory system matches physical stock.

## When to Use
A procedure for receiving, storing, counting, and dispatching inventory including cycle counting schedules, discrepancy resolution, and system updates.

## Instructions
1. Review the template below and familiarise yourself with the structure
2. Replace all [bracketed placeholders] with your manufacturing business details
3. Customise the tone and formatting to match your brand
4. Save in your preferred tool (Shopify or Xero)

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## Inventory Management Standard Operating Procedure

### 1. Purpose and Scope
This SOP establishes the standard procedures for receiving, storing, counting, and dispatching inventory. It ensures system stock levels match physical stock, minimises shrinkage and waste, and maintains accurate records for financial reporting and order fulfilment. This procedure applies to all physical inventory held by the business, whether in warehouse, retail, or third-party storage locations.

### 2. Roles and Responsibilities
- **Warehouse Manager/Inventory Manager:** Oversees all inventory operations, manages the cycle count schedule, and investigates discrepancies.
- **Warehouse Team Members:** Execute receiving, putaway, picking, packing, and dispatch operations.
- **Finance Team:** Reconciles inventory values with the accounting system monthly.
- **Purchasing/Operations:** Manages reorder points and supplier relationships.

### 3. Prerequisites
- Shopify inventory management configured with all SKUs and locations
- Airtable inventory tracker for supplementary tracking (lot numbers, expiry dates)
- Barcode scanner or stocktake app configured
- Warehouse layout documented with designated storage zones

### 4. Procedure

**Step 1: Receiving Inventory**
When a delivery arrives:
1. Check the delivery against the purchase order (correct items, quantities, condition)
2. Inspect for visible damage and note any issues on the delivery docket
3. Photograph damaged items before signing the docket
4. Sign the delivery docket, noting any discrepancies
5. Update Shopify with the received quantities within 2 hours of receipt
6. File the delivery docket with the corresponding purchase order

If discrepancies are found, notify the Inventory Manager and Purchasing immediately. Do not update system quantities until the discrepancy is resolved with the supplier.

**Step 2: Putaway and Storage**
1. Assign each received item to its designated storage location following the warehouse zone map
2. Apply location labels if the item is new or storage location has changed
3. For items with expiry dates, follow FIFO (First In, First Out) - place new stock behind existing stock
4. Record the storage location in Airtable
5. Ensure all items are stored safely, securely, and in accordance with any special handling requirements (temperature, fragility, hazardous goods)

**Step 3: Cycle Counting**
Rather than a single annual stocktake, perform rolling cycle counts:
- **A items** (top 20% by value): Count monthly
- **B items** (next 30% by value): Count quarterly
- **C items** (remaining 50%): Count every 6 months

For each count:
1. Print the count sheet from Shopify for the items to be counted
2. Two team members count independently (dual count for accuracy)
3. Compare counts. If they differ, count a third time
4. Record the final count in Shopify and Airtable

**Step 4: Investigate Discrepancies**
If the physical count differs from the system count:
1. Recount the specific SKU to confirm
2. Check recent transactions: sales, returns, transfers, and adjustments
3. Check for misplaced stock in adjacent locations
4. Review CCTV footage if theft is suspected
5. Document the investigation findings
6. Adjust the system quantity only after approval from the Inventory Manager
7. Record the adjustment reason in both Shopify and Airtable

Target: System accuracy of 98% or higher.

**Step 5: Picking and Dispatch**
When processing orders:
1. Print or view the pick list from Shopify
2. Pick items from the correct locations, checking SKU and quantity
3. Update system quantities as items are picked
4. Pack items securely with appropriate packaging materials
5. Include the packing slip and any required documentation
6. Generate the shipping label and apply to the package
7. Hand off to the courier and record the tracking number in Shopify

**Step 6: Returns Processing**
When items are returned:
1. Inspect the returned item against the return authorisation
2. Classify as: Restock (saleable condition), Refurbish (minor repair needed), or Write-off (unsaleable)
3. Update Shopify inventory for restocked items
4. Process the refund or credit per the Returns Policy
5. Record the return reason in Airtable for trend analysis

**Step 7: Monthly Reconciliation**
At month end, the Finance team reconciles inventory values between Shopify and the accounting system (Xero). Investigate and resolve any value discrepancies. Ensure inventory adjustments are properly coded in the accounts.

### 5. Quality Checks
- Receiving accuracy checked weekly (spot-check 3 deliveries per week)
- Cycle count schedule adherence reviewed monthly
- Discrepancy rate tracked and reported monthly (target: under 2%)
- Pick accuracy measured via customer complaint data

### 6. Revision History
| Version | Date | Author | Changes |
|---------|------|--------|---------|
| 1.0 | [Date] | [Author] | Initial release |

### 7. Related Documents
- Warehouse Zone Map
- Reorder Point Calculator (Airtable)
- Returns and Refunds Policy
- Inventory Adjustment Authorisation Form

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**Complexity:** intermediate | **Setup time:** 25 minutes | **Tools:** Shopify, Xero, Airtable

Note: This template has been tailored for manufacturing businesses in Australia. Adjust terminology and compliance references to match your specific context.