What a Warehouse Operations Audit Actually Covers

Many people confuse a stock count with an operations audit. A count answers the question "how much do we have?". A warehouse operations audit asks "how does this place work, and where does it leak?". A warehouse can come out of a count with a sound figure and still run in a way that makes losses a matter of time. If you own stock in another country, knowing what an audit covers, and what it does not, protects you from paying for a report that does not answer your question.

The areas an audit looks at

An audit usually follows the goods through the warehouse, from entry to exit:

• Receiving: how incoming deliveries are checked, who counts them, and whether differences and damage are recorded at the moment of arrival.
• Storage: the order of locations, the clarity of labels, the separation of damaged goods and other owners' goods, and storage conditions.
• Picking: how orders are assembled and whether what was picked is checked before loading.
• Dispatch: who authorises goods to leave, which document goes with them, and who checks the vehicle at the gate.
• Records: the accuracy of stock cards, the speed with which movements are posted, and how manual corrections are handled.
• Returns and damage: where they are kept, who decides what happens to them, and whether they appear in the figures.
• Access and security: who holds keys, how entry is controlled and what is logged.

Not every audit has to cover the whole list. What matters is that it is written down at the start which areas are in and which are out, and that the warehouse owner agrees.

The evidence an auditor collects

An audit relies on what is seen rather than what is said, so its evidence comes in several kinds:

1. Observation: the auditor watches one truck being received and another being dispatched as it really happens, and notes what he or she saw.
2. Document tracing: the auditor takes a number of transactions and follows them from the first document to the shelf, or from the shelf to the last document.
3. Re-performance: the auditor counts personally and compares the result with what was recorded.
4. Conversations: the auditor asks staff about their procedures, then sets their answers against what was observed.
5. Dated photographs: the auditor fixes the locations and conditions worth mentioning.

A worked example (conditional figures)

The auditor picks ten deliveries received over the last month and traces them. In eight, the documents agree with the receiving record and with what is on the shelves. In a ninth, the record shows 120 cartons while the delivery note says 126, and there is no remark explaining it. In the tenth, the receipt was recorded three days after the goods arrived. This is a small sample and does not allow a percentage to be applied to the whole warehouse, but it is enough to show that receiving needs a wider check. The auditor writes this precisely: what was tested, what was found, and what cannot be concluded from it.

What you should be able to read at the end

A good operations report contains the scope and the date of the visit, the method of testing, the findings ranked by seriousness, the evidence for each finding, practical recommendations the warehouse can carry out, and the limits of the work. It helps if findings are classed as high, medium or low priority, with an owner and a date named for each. The report should open with a short summary that a decision-maker can read in minutes. If a finding has no evidence attached, such as a dated photograph, ask for it before you rely on the finding.

What an audit does not cover

A warehouse operations audit is not a financial audit of the accounts, not an assessment of legal or customs compliance, not a certificate of the quality of the goods, and not a guarantee that losses will not occur in future. It is an evidence-based picture of how the warehouse worked during the period examined. For legal, accounting and customs questions, go to the specialists in those fields.

In short

A good audit starts with a written scope and ends with ranked, evidenced findings and recommendations that can be carried out. WarehouseDepo provides operations audits for owners and investors who cannot watch their warehouse themselves: it follows receiving, storage and dispatch on site, compares them with the paperwork and shows you where control is weak and how to close the gap.