Managing inventory is crucial for any successful business.
However, it can be tough to handle effectively, especially since inventory management systems are always changing.
Some studies suggest that nearly half of small businesses don’t keep track of their inventory. Among those that do, the majority 37% face challenges related to stock. This aligns with data from 2023, showing that stock issues are a major hurdle in inventory management.
If you haven’t already established a method to oversee your entire inventory, you might want to consider incorporating inventory cycle count into your workflow.
Check out our comprehensive guide to inventory cycle counting to learn what it entails, its advantages, and how to carry it out effectively.
Inventory Cycle Counting: What Is It?
Cycle counting stands out as the top method for keeping track of warehouse inventory.
In simple terms, it’s a way to save time. Rather than stopping everything to count every item in the warehouse, you pick out a small group of items regularly and count those.
The count is then compared to what your system says you should have, acting as a reference point. This process is repeated for various categories or storage sections on a set schedule.
But why is cycle count in warehouse so important? Let’s find out.
Cycle Counting: Why Is It Important?
Cycle counting in inventory management is like doing a reality check on what’s in your inventory and fixing any mistakes.
Usually, you rely on your sales and reorder records to know what’s in your warehouse. If you use inventory software, your numbers update as things are sold, ordered, or shipped.
But sometimes, inventory gets damaged, lost, or taken, and your system still thinks it’s there. Cycle counting helps catch these errors and lets you get rid of any items that can’t be sold.
Doing these regular counts also helps you spot which products or parts of your warehouse are more likely to have missing items. With this information, you can figure out if there’s employee theft or if there are problems in your facility causing damage.
Now let’s explore the different types of cycle counting.
Cycle Counting: Types
There are primarily three kinds of cycle counts. You can opt to use them individually or develop a plan to employ them together.
1. Control Group Cycle Counting
Control Group Cycle Counting involves creating a small test group and counting its items repeatedly over a short time. This method helps businesses identify any problems with their counting methods and refine the process before expanding it to larger groups of items.
2. Random Sample Cycle Counting
With Random Sample Cycle Counting, you have the flexibility to decide how many items to count in each cycle. This means less disruption in your warehouse, as you can carry out the counting during regular business hours.
There are two approaches to random sample counting:
- Constant Population Counting
- Decreasing Population Counting
In constant population counting, you count the same number of items each time. In decreasing population counting, items are counted and then excluded from subsequent counts until everything has been tallied.
Both methods work for selecting a random sample; you just need to choose the one that suits your warehouse best.
3. ABC Cycle Counting
This method follows the Pareto principle, often known as the “80/20 rule,” which suggests that 80% of outcomes stem from 20% of inputs. By categorizing products into A, B, or C groups, you can focus on the items that contribute the most to your results.
Physical Inventory vs Cycle Counting
Physical Inventory
It counts involve physically counting all the products in your store or warehouse and then comparing that count to what’s in your inventory software. While it’s advised to do a full physical count once or twice a year, it’s very time-consuming and prone to human error.
Cycle Counting
Cycle counting, on the other hand, breaks the process into smaller, more manageable parts that are done regularly throughout the year. It focuses on counting a small set of products at a time. Cycle counts help ensure that the cost and count of your inventory in your records match what’s actually in your warehouse and on your shelves.
How To Carry Out Cycle Counting?
The cycle count inventory process involves the following steps:
1. Reviewing Records: Begin by ensuring that your database is accurate. Take the time to review and correct any errors in data entry for all inventory transactions.
2. Generating a Cycle Count Report: Create a report specifically for the cycle count. If you’re using a mobile device for the count, make sure to upload the report onto it.
3. Commencing the Count: Counters should carefully examine inventory locations, descriptions, and quantities as outlined in the report and compare them to what’s physically present on the shelves.
4. Investigating and Reconciling: Identify any disparities discovered during the count and work with the stock manager to reconcile them. Look for any recurring patterns of errors.
5. Adjusting Procedures: Implement any necessary changes to inventory counting policies or procedures based on the findings.
6. Updating Records: Make the necessary adjustments in the inventory record database to accurately reflect what’s actually on the shelves.
7. Calculating and Repeating: Regularly audit the inventory and calculate the accuracy percentage to ensure ongoing accuracy and effectiveness.
Benefits Of Cycle Counting
Cycle counting offers several advantages, including the ability to check what you physically have against what your stock count or inventory software indicates you should have.
Additional benefits include:
- Increased rates of fulfilling orders.
- Improved levels of customer service.
- More precise evaluations of inventory.
- Boosted sales.
- Longer intervals between physical counts.
- Reduced occurrences of errors.
- Lower instances of inventory write-offs and obsolete items.
- Overall improvement in operational efficiency.
FAQs: Inventory cycle count 101:Your Guide to Successful Inventory
How frequently should you conduct inventory counts?
The general rule is as frequently as you can. It’s advisable to perform a full cycle count of all your inventory at least once every quarter. However, some warehouse operations opt for daily cycle counts in key sections strategically to prevent a large accumulation of counts at the quarter’s end.
When is the best time to conduct inventory counts?
Ideally, inventory counts should take place either at the end of the day when operations have ceased or before they begin. However, if you need to perform inventory counts while operations are ongoing, it’s crucial to have a system in place to track newly arrived items picked for shipping.
How do you determine which items or sections of your inventory to prioritize for cycle counts?
Focus on items that sell well or are often problematic. Use ABC analysis or past records to pinpoint important items. You should also concentrate on areas with valuable stock or frequent activity to streamline cycle counts.
Conclusion
Improving revenue through better inventory control is often overlooked by many companies, yet it’s one of the simplest methods to enhance profits.
While conducting full physical inventories can seem daunting, requiring significant time, staffing, and disrupting warehouse operations, there’s an alternative approach: cycle counts. These offer a regular, efficient way to monitor inventory with minimal staff and no interruption to operations or financial losses.
Additionally, the various methods available for conducting cycle counts provide flexibility, allowing you to choose and customize the most suitable option for your company. Regardless of the chosen approach, implementing a cycle count system ensures more frequent and accurate inventory numbers.
Transitioning from traditional full-scale physical inventories to a cycle count system may seem challenging initially. However, by following the guidelines process outlined in this article, the process should be simple and smooth.
