What is Cycle Counting in Inventory Management? (Procedure, Methods, Benefits, and Best Practices)

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Cycle Counting

Keeping track of your inventory can be daunting, especially if you have a large stock. It’s easy to lose track of what you have on hand, and before you know it, you’re out of stock on an item that’s popular with your customers.

Cycle counting is a method of counting your inventory that helps you keep track of your store more effectively.

This post will explain what cycle counting is, how it works, and some benefits of using it to manage your inventory.

After reading this post, we hope you’ll better understand inventory counting and how it can help you keep track of your inventory more effectively.

What is cycle counting?

It is a method of counting inventory items regularly. It aims to identify and correct discrepancies between the physical count and the inventory records. That helps to ensure that the inventory records are accurate and up-to-date.

What is the inventory cycle count?

Inventory cycle count is a periodic inventory process where specific items in the inventory are counted to ensure their accuracy. The counting can be done manually or through automated processes.

Procedure to conduct cycle counting

Cycle Counting Steps

1. Choose the items to be counted

The first step in it is choosing the items you will count. You can do this by selecting specific items or product categories.

2. Enter all transactions of the inventory item

Make sure all transactions are updated in the inventory database

3. Take out the print of the counting report

The counting report contains the item’s bin location, assignee, and the number of items in the inventory database.

4. Physical count

The next step is to count the items physically. You can do this by using a manual process or an automated process.

5. Compare the count to the reports

After that, compare the count to the records. That will help to identify any discrepancies between the two.

6. Investigate any discrepancies

Investigate any discrepancies that are found. You can do this by looking at the records and investigating the cause of the difference.

7. Adjust the inventory records

After the investigation is complete, the inventory database should be updated to eliminate the errors after the cycle count.

8. Update the cycle count processes if needed

If needed, enhance the procedure, train the employees, and do the needful thing to eliminate the error during cycle count.

9. Calculate the inventory accuracy percentage

Regularly audit the inventory and do calculations for an inventory accuracy percentage.

Cycle counting best practices

  • End up all the transactions for the inventory items before counting
  • Select items that are high value or have a high turnover rate for cycle count
  • Choose the inventory of the same category at a time
  • Assign the responsibility of counting to a particular employee
  • Use the right tools for the job.
  • Train employees effectively.
  • Label the inventory items with count numbers
  • Use wireless barcode scanners for more accuracy
  • Make sure counting done for all inventories at least once in a quarter
  • Compare the counted quantities with the system-generated reports
  • Do not forget to update the records in the system after counting
  • Investigate the process when the error comes
  • Record process, changes, and results

By following best practices, businesses can ensure that their cycle counts are accurate and helpful in managing inventory.

Advantages

  • It ensures the accuracy of the inventory.
  • It helps to detect any discrepancies in the inventory
  • It keeps the inventory up-to-date
  • Improves the efficiency of the inventory management process
  • Reduces the cost of inventory management
  • It helps to improve customer satisfaction
  • Reduces the risk of stock-outs
  • Decision-making in inventory management
  • It helps to increase the turnover of the inventory
  • Improve the overall efficiency of the business

Disadvantages

  • It can be time-consuming and labor-intensive. It can also be expensive to implement an automated inventory counting process.
  • If the same inventory item is stored in different locations, there will be confusion about record updation after the count.

Comparing it with Physical Counting

Cycle CountingPhysical Counting
Done regularly( daily, weekly, monthly, or quarterly)Done annually or occasionally
Done on a selected number of itemsDone on all items
Done using a barcode scanner or a counting machineDone manually
It is less time-consuming and less labor-intensiveComparatively high time-consuming and labor incentive
It is more accurate Comparatively less accurate
The disruption level is lowDisruption is high

Methods

Methods of Cycle Counting

ABC cycle counting

In the ABC method, we classify items according to their value. “A” items are the most important and valuable, while “C” items are the least important. The number of inventory counts for each item is based on its value.

Counting by usage

In this method, we classify items according to how frequently they are used. The most commonly used items are counted more often than those used less often.

Group method

This method counts a group of SKUs (stock-keeping units). The items are grouped based on physical location, count frequency, or other factors.

Opportunity-based method

This method is also known as “floating inventory.” It involves counting items that are not in their usual location.

Random method

In this method, items are selected for counting at random. It is the most common method of counting.

Counting by the surface area of the storage

In this method, items are counted based on the surface area of their storage location. The counting takes place for items in their physical location.

FAQs

What is the purpose of cycle counting?

The purpose of it is to ensure that the inventory is accurate and up-to-date by counting inventory regularly. That helps to prevent over or understocking.

What is a good cycle counting accuracy?

A good cycle counting accuracy is 95% or higher. That means the inventory is accurate within 95% of the actual quantity of items in stock.

Conclusion

Cycle counting is a vital process in inventory management. Regularly counting your inventory can catch discrepancies and prevent them from becoming more significant problems. In this way, this can save you time and money in the long run.

Following best practices and using the proper techniques will help you get the most out of your cycle count. We hope you found this post helpful.