Cycle Counting and Physical Inventories

NiceLabel

Ever wonder how large companies keep their inventory straight? If you're like many small to medium size businesses, taking a full physical inventory is a painful process. How do companies on a much larger scale do it?

They cycle count. And cycle count. And cycle count. In fact, they almost never shut down for a full physical inventory. It's simply too expensive to be closed for even a day. Instead, they are always cycle counting, always counting something.

So what exactly is cycle counting? It is the process of continually validating the accuracy of the inventory in your system by regularly counting a portion of your inventory, on a daily or weekly basis, so that every item in your inventory is counted at least several times a year.

Cycle counts contrast with traditional physical inventory in that physical inventory stops operation at a facility and all items are counted, audited, and recounted at one time. Cycle counts are less disruptive to daily operations, provide an ongoing measure of inventory accuracy and procedure execution, and can be tailored to focus on items with higher value or movement (known as cycle count by frequency).

The benefits of continuously cycle counting are numerous:

It's impossible to fully take advantage of the replenishment functionality found in many small inventory software packages without maintaining accurate inventories in your system.
Nothing erodes customer service more than workers who don't trust the inventory in the system. When the information is wrong, and the needed re-orders aren't coming in when they're needed, it's very difficult for even the most skilled account executive to present a confident, positive face to the customer\
Counting your inventory on regular basis imposes an additional level of operational efficiency. When you are constantly counting something, you’re your inventory must always be organized, committed inventory properly tagged, and transfers processed and closed out.
Frequent cycle counting shortens the period of time between physical counts of any given item. This gives you a much better opportunity to fully diagnose the cause of any discrepancy, close any procedural loopholes and coach any human errors. Inventory write-offs, as a percentage of inventory investment, are typically much lower with regular cycle counting.

Here are a few additional thoughts to keep in mind as you're implementing your cycle count program:

Cycle counting must become part of your daily or weekly routine. Turn on the lights, unlock the doors, make coffee, cycle count. If you only cycle count sporadically, you will only get sporadic results. The way to achieve the full benefit of any cycle count program is to count regularly, every day or every week, without fail.
Set up a schedule for conducting your cycle counts. It’s recommended to develop a periodic cycle count calendar. You should schedule to count everything at least once in that period, and your faster turning, higher volume items and categories two or three times. Most software packages allow you to conduct a cycle count by category or subcategory.
Like any physical inventory, the key to obtaining an accurate count is the preparation you do. This preparation needs to take place the day or night before the actual cycle count, so that on the day of the cycle count there's no question that the inventory is ready to be counted.
Like a full physical inventory, you'll need to close out any open inventory transactions in those categories or subcategories that you are counting before you start. All restocking from understock, overstock or backstock must be completed before counting begins. All received purchase orders and inbound transfers need to be received in the system and physically put away. All completed customer orders need to be closed and invoiced.
Most inventory software packages will take a snapshot of your inventory when you open up a cycle count in the system, then process adjustment transactions against that snapshot after you enter your actual counts. This means that the actual counting must take place right after the cycle count is opened. For this reason, it’s recommended that cycle counts take place first thing in the morning.
Start small. Don't try to count your biggest or best moving category or subcategory right away. Start with something smaller, with less movement, to learn how your software package works and build your understanding of the process and “wok out all the kinks”. It’s recommended to spend a month of counting carefully selected categories or subcategories, building your skill and confidence, before implementing a periodic schedule.

Automation: To conduct efficient and accurate cycle counts, many organizations use some form of software to implement an inventory control system, which is part of a warehouse management system. These systems may include mobile computers with integrated barcode scanners that allow the operator to automatically identify items, and enter inventory counts via keypad. The software then transmits data to a database on a host system which can generate inventory reports.

Barcoding Inc. can help you implement a periodic cycle counting schedule within your organization. We can provide the hardware, software, training and support needed to help you track your inventory and reduce the number of stock-outs and redundant inventory within your facility.

Contact a Barcoding Inc. representative today to learn more – 888.860.7226 – info@barcoding.com.

For Further Information

Barcode Systems

Call Now: 888.412.7226

Our sales team will answer all your questions about inventory control and automatic data collection.