Inventory accuracy is the backbone of efficient warehouse and retail operations, knowing exactly what stock is on hand and where it’s located. Yet many businesses struggle with large discrepancies between recorded and actual inventory. In fact, one analysis found a major retailer’s store inventory accuracy could drop as low as 60% by year-end due to theft, errors, and other losses.
Herb Billings, VP of Technology Strategy at Datascan, has noted that with only annual counts, “inventory record accuracy may be as low as 35% – in other words, nearly two-thirds of what you think you have in stock is incorrect.” These eye-opening figures underscore how traditional manual inventory methods often fall short, leading to lost sales, excess stock, or unhappy customers. It’s no wonder companies are turning to warehouse automation and advanced inventory management tools to dramatically improve accuracy.
How Automation Improves Inventory Accuracy
The Case for Automation in Inventory Management
Automation is transforming how warehouses and stores manage inventory. Replacing clipboards and sporadic manual counts with technologies like barcode scanners, RFID systems, and real-time tracking brings a new level of precision. Industry statistics strongly back this up. A study at the University of Arkansas found that implementing an RFID-based system improved inventory accuracy by about 13% compared to traditional methods.
“Inventory accuracy is one of the keys to an efficient and effective supply chain,” explains Bill Hardgrave, a leading researcher in RFID, noting that inaccuracy rates were often as high as 65% before automation. He emphasizes that the 13% accuracy boost in their tests “can significantly reduce unnecessary inventory” and yield millions in savings for large retailers.
Other research confirms the problem: retailers often have correct inventory counts on only 35% of their items on average. In this context, even modest accuracy gains make a big difference. It’s not just about avoiding stockouts, it’s about tighter control that ripples through the whole operation.
Critically, automated inventory systems also reduce the need for manual adjustments and fixes. The Arkansas study observed that with RFID, manual inventory adjustments by store staff dropped significantly, as the system itself kept counts more accurate.
Fewer human “guesstimates” means data that managers and automated systems alike can trust. This trust translates to leaner stock levels and better on-time fulfillment. In fact, in a survey of warehouses, those deemed “automated and efficient” were 76% more likely to achieve 99%+ inventory accuracy (virtually eliminating record errors) compared to less automated sites. Such high accuracy is the gold standard that manual processes simply struggle to reach.
Barcode Scanning: A Simple Yet Powerful Tool
One of the most accessible automation tools for inventory control is the humble barcode scanner. Barcodes have been around for decades, but their impact on accuracy cannot be overstated. Scanning an item’s barcode to log it virtually eliminates the typos and transcription errors that plague manual data entry. In fact, studies show that keyboard data entry yields about 1 error per 300 keystrokes, while barcode scanning has an error rate around 1 in 3 million – making it roughly 10,000 times more accurate.
That kind of precision directly boosts inventory record accuracy. Each scan instantly and correctly updates the inventory system, whereas a person writing or typing counts might misread labels or hit the wrong key.
Beyond accuracy, barcodes speed up the work. Warehouse workers can scan items 5-7 times faster than they could type the same data. This efficiency means more frequent cycle counts are feasible. Instead of doing a laborious full inventory once a year (and watching accuracy decay in between), staff can do cycle counts or perpetual inventory updates with scanners.
The result is up-to-date stock information at any given moment. Modern inventory systems even allow scanning via mobile devices or apps, feeding data directly into cloud databases in real time. This real-time visibility is crucial – managers can spot discrepancies immediately and respond before they snowball into bigger problems. As Datascan highlights, the goal of these solutions is to make counting “easy, efficient, reliable, and accurate”, emphasizing real-time updates and user-friendly scanners so that counts can happen how and when the business needs.
RFID and Real-Time Tracking for Enhanced Visibility
While barcodes require line-of-sight and one-by-one scanning, Radio Frequency Identification (RFID) takes automation further by enabling bulk, wireless identification of items. RFID tags emit a radio signal with a unique ID, allowing scanners (handheld or fixed readers) to capture dozens or hundreds of items almost simultaneously. This technology can massively speed up inventory counts and improve accuracy.
Research from the RFID Lab at Auburn University showed RFID deployments taking inventory accuracy from typical levels (often around 65% accuracy) to the mid-90s, a double-digit percentage improvement. In one example, a department store that added RFID saw its inventory accuracy climb to 95%, after initially confirming it had only about 65% accuracy with manual processes. The automated counts revealed many errors and “phantom” inventory that traditional methods had missed.
The power of RFID lies in speed and frequency. “One of the great benefits of RFID is that counting merchandise can be accomplished in a fraction of the time of traditional methods,” notes Datascan’s Herb Billings, adding that one or two people can scan high-value items weekly in minutes, rather than hours.
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Because counts are so fast, they can be done more often (even daily), and frequent counts keep records highly accurate. Automated systems enabled by robotics and RFID can achieve accuracy rates approaching 99.9% in ideal conditions. While 100% perfection may be unrealistic, getting as close as possible means far fewer surprises in stock levels. Retail studies have noted that doing regular cycle counts (instead of annual) can increase sales by 4–8% over time – likely because the store is less often out-of-stock or can correct errors before they impact customers.
RFID and other real-time tracking tools also help in preventing shrinkage (loss of inventory due to theft, damage, or misplacement). Items embedded with RFID tags are harder to remove unnoticed, and if something is missing, the system flags it quickly since it’s continually monitoring inventory movement.
Retailers are increasingly adopting RFID for this reason – by 2023, about 80% of retailers either have or are implementing some form of RFID for inventory management and loss prevention. The ability to pinpoint inventory in real time not only deters theft but also catches administrative errors (like a box set aside in the wrong location) before they become major discrepancies. In warehouses, which traditionally experience around 0.2% inventory shrinkage on average, RFID and automation aim to push losses even closer to zero by eliminating the human lapses that allow shrinkage to occur unnoticed.
Minimizing Human Error and Preventing Shrinkage
Warehouse automation significantly reduces the potential for human error by streamlining how inventory is tracked and recorded. When employees manually input stock movements, they are more likely to miscount, misplace, or mistype product details. Small mistakes can quickly add up, leading to discrepancies that disrupt order fulfillment and create unnecessary challenges. Automation eliminates these risks by ensuring that every inventory movement is logged accurately and instantly.
Another key advantage of automation is its ability to prevent inventory shrinkage. Whether due to theft, miscounts, or misplaced items, stock losses can impact profitability and create uncertainty in supply chain management. Automated tracking provides better visibility into inventory movement, making it easier to identify discrepancies early. Businesses that implement real-time tracking systems often find that missing stock is detected more quickly, allowing them to take immediate corrective action.
Additionally, automation prevents misallocation of inventory. When a product is scanned, the system confirms its exact location, ensuring that it is stored and retrieved correctly. This reduces costly errors caused by misplaced stock, which can lead to delays, confusion, and inefficiencies. With automated tracking, businesses maintain better control over their inventory, leading to more precise record-keeping and a more streamlined warehouse operation.
The Impact on Warehouse and Retail Industries
Warehouse automation is having a profound effect on both warehouse and retail operations. In warehouses, automation enables higher efficiency, faster stock tracking, and improved accuracy. Highly automated warehouses have been found to ship orders 99 percent on time and maintain near-perfect inventory accuracy. These facilities rely on automated storage and retrieval systems, robotic picking systems, and AI-driven inventory tracking to keep operations running smoothly.
Retailers are also seeing the benefits of automation. With the rise of omnichannel shopping, inventory accuracy has become more critical than ever. Inaccurate stock records lead to customers placing online orders for items that are actually out of stock, resulting in lost sales and damaged customer trust. Some retailers have reported that after implementing RFID tracking, their in-store inventory accuracy improved from below 70 percent to over 95 percent.
Retailers using frequent automated cycle counts have also seen a sales increase of 4 to 8 percent, as better inventory visibility ensures that products remain available to customers. Many companies are now using automation to keep real-time inventory records updated, allowing them to fulfill online orders from store inventory and prevent overselling.
To see these principles in action, consider a retailer that partnered with Datascan, a company specializing in inventory automation services. Kirkland’s, a home décor retail chain, switched to Datascan’s self-scan inventory solution and saw immediate improvements.
According to Eric Williams, a regional manager at Kirkland’s, they “shorten[ed] the length of time for store inventory from several weeks to one day with Datascan”. In the past, Kirkland’s relied on third-party counting teams and lengthy annual counts. With Datascan, they equipped their own store associates with handheld scanning devices to perform the counts. Not only did this dramatically speed up the process, but it also improved accuracy because store employees know their products best.
Staff were initially nervous about the new system, but quickly found it “was a seamless transition to self-scan and it all made perfect sense to them”. The stores even reported loving the new process, especially “having full control over their own inventory”. This sense of ownership further reduces errors – employees are more diligent and careful when they are in charge, aided by user-friendly scanners that prevent mistakes.
Over time, Kirkland’s developed best practices around this automated counting and fully integrated it into their operations. The result is better on-hand accuracy and actionable data. With Datascan’s system, Kirkland’s can run customizable reports right after each count and analyze inventory patterns, something that was impossible with infrequent manual counts.
They can “better predict and analyze how things are going with inventory and what we should change by referencing and studying these custom reports,” enabling continuous improvement. Essentially, the automation not only gives more accurate numbers, it provides insights – which products are constantly off, which stores have shrink issues, etc. This feedback loop helps Kirkland’s make changes to prevent future errors and losses.
As Byron Coleman, Kirkland’s Director of Loss Prevention, put it, the Datascan team and tools have “more than delivered time and time again,” helping their stores execute accurate counts and get the information they need from each inventory. Case studies like this echo across the industry, as companies large and small leverage automation to take control of their inventory accuracy in ways that simply weren’t possible before.
What This Means for Your Business
Warehouse automation has transformed inventory management, providing businesses with unparalleled accuracy, efficiency, and control. Companies that implement automated tracking systems benefit from real-time visibility, reduced human error, and better stock optimization. As the retail and warehouse industries continue to evolve, automation will be essential for staying competitive.
For businesses looking to improve inventory accuracy and streamline operations, investing in automation is no longer optional, it is a necessity. With real-time tracking and automated processes, companies can minimize stock discrepancies, enhance order fulfillment, and build a more resilient supply chain.
