Inventory Cycle Counting – A Must Do

Inventory Cycle Counting – A Must Do

Inventory is an important element of any business and its supply chain. Inventory cycle
counting is essential to accurately managing the inventory of any business. If the inventory is
not properly managed the business will suffer financially. Before, we start discussing the
benefits of cycle counting, it is important to fully understand what is cycle counting?

So what is cycle counting? Simply put, it’s an alternative to the usual way in which inventory is
counted. Instead of conducting a taxing yearly physical count of all the items in your store and
warehouse, you conduct daily or weekly counts on some of the items, such that all items are
continuously counted, several times a year.

Cycle counting is process of regular assessment of the inventory. This is extremely important
for large stores because unlike smaller stores or retailers, they are unable to regularly count all
their inventory items cost effectively. Therefore, they cycle count a small portion of their
inventory in order to make sure that the information about their inventory is accurate and any
discrepancy is fixed quickly. This also helps them precisely identify and investigate underlying
issues that result in inventory record errors, thereby fixing the root cause of the problem.
Businesses can design their own cycle count program based on available resources and

accuracy required. This approach ultimately improves the efficiency of all staff responsible for
handling inventory, as they are constantly aware of the need for accuracy due to the regular
audit of their processes and procedures.

Major Benefits of Inventory Cycle Counting

The major benefit of inventory cycle counting includes:

i) Improved Inventory Accuracy

Cycle counting ensures that each of the items in your inventory is counted more than once a
year. This brings an increase in the overall accuracy of the inventory data and significantly
improves the inventory skills in the management of the business. This process is necessary for
the accuracy assessment of inventory, because errors can occur in many areas of the business
such as the sale process, planning and scheduling, receipting and dispatching. These errors
ultimate create problems in the operation and supply of products, resulting in late or early
replenishment of the inventory, which affect sales performance, level of inventory and the
image of the organization.

ii) Pinpointing the Source of Inventory Error

With cycle count occurring on a regular basis, the inventory manager and the concerned people
find it easy to investigate the reason for the discrepancies in the inventory record. This will help
them in streamlining the overall process of inventory management. If it pertains to software
problems or certain employees or any other such causes, inventory cycle counting ensures that
the cause of errors in the inventory records are identified quickly.

iii) Increased Operational Efficiency

Inventory cycle counting ensures the appropriate arrangement and organization of the business
inventory every time a cycle count is going to be done. This means that your inventory is
reviewed on a regular basis. This approach ultimately improves the efficiency and attitude of
the staff responsible for inventory management. They realize the important role they perform,
their impact on inventory accuracy and the need for well-documented processes.

Cycle Count Design

Different experts have different perceptions about a Cycle Count Design, but there are some
essential elements that should be incorporated in an effective design, as listed below:

i) Assignment of Count Areas

To achieve the count accuracy, it is better to assign specialized count areas of the warehouse to
cycle counters.

ii) Report Printing

To incorporate transparency and accuracy into the process, experts suggest not printing the
inventory quantities on the report. The original quantities and variances are only revealed
when all the required transactions have been completed and verified.

iii) Count Frequency

It is best to assign the frequency of count based on the Items ABC Inventory Classification code
where the A items are counted more often than the C Items. For more information on the many
uses the ABC Inventory Classification code refer the authors website at
www.Inventoryskills.com.

iv) Investigation and Discussion

Consult the inventory database to pinpoint the reasons behind errors and share your findings
with the concerned warehouse manager and cycle counters. Try to identify underlying pattern
of errors (if there is any) and come up with solutions to avoid them.

v) Inventory Audit

To streamline the processes to make them error free, schedule inventory audit regularly and
disseminate the resulting information among all concerned employees to keep everyone on the
same page.

Conclusion

Inventory Cycle Counting is definitely a must have for large and small businesses alike, but
implementing it in bits and pieces can only lead to further inaccuracies and discrepancies. So,
make sure you seek all the professional help you might need to get things done in a systematic
manner.

Remember with New Skills your Future Starts Now

Finally…

If you found this article helpful, contact Wayne at www.inventoryskills.com about other
inventory management-training guides and inventory planning spreadsheets that enable
“learning by doing”. Here you’ll find guides based on e-learning principles that are very cost
effective, focused, current and developed by practitioners with a real passion for the subject.
Try them. You won’t be disappointed

Inventory Cycle Counting – A Must Do

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Inventory Cycle Counting – A Must Do