Understanding the cycle count and its benefits for inventory management
What is a cycle count?
Cycle counting is a method of inventory management that involves counting a small subset of inventory periodically rather than counting all inventory at once. A business ensures that inventory levels are accurate and current by checking stock on a regular schedule, like weekly or monthly.
Cycle count vs physical count
A physical count involves counting all inventory in a warehouse or storage facility at one time, typically once or twice a year. This process can be time-consuming and expensive since it requires you to shut down operations until you complete the audit.
Counting by cycle is more manageable and cost-effective because your business only needs to record a small portion of inventory each period.
Why is inventory cycle counting important?
A cycle count ensures that inventory levels are accurate and up-to-date, preventing stock outs and overstocking. In addition, it can help identify discrepancies between inventory records and actual inventory levels, which can help to improve inventory accuracy and reduce the risk of theft or loss.
Cycle counting can also improve overall inventory management by providing valuable data on inventory turnover, lead times and other key metrics.
Types of inventory cycle count procedures
ABC cycle counting
ABC cycle counting is a method of inventory management that involves categorising inventory items A, B or C based on their value and frequency of use. This method counts items with a high value and frequency more often, and items with a low value and frequency less often.
Usage-based counting
Usage-based counting refers to managing inventory items according to their usage rate. This approach counts items with high usage more often than those with low usage.
Hybrid counting
The hybrid counting method is a combination of ABC and usage-based counting. This method involves categorising items based on their value and frequency of use, and then counting them based on their usage rate.
Opportunity-based counting
In opportunity-based counting, you count inventory items when an opportunity arises, such as when a shipment arrives or you move a product to another location.
Random sample cycle counting
Random sample cycle counting is a method of inventory management that involves randomly selecting a subset of stock to count regularly. It ensures that you record all inventory items at some point while also being efficient and economical.
Inventory cycle counting best practices
Ensure your inventory data is up-to-date
Before conducting a cycle count, it’s essential to ensure that your inventory data is accurate and up-to-date. This step helps prevent discrepancies between inventory records and actual inventory levels.
Leverage technology to mitigate errors and count efficiently
Technology, such as barcode scanners and inventory management software, can help you minimise the risk of mistakes and count inventory more efficiently. Controlling risk and automating cycle counting can help save time and reduce inventory costs.
Alternate between counting staff
To ensure accuracy and prevent bias, alternate between counting staff. Operating on a rotation can help prevent employees from becoming too familiar with certain inventory items, which can lead to errors or discrepancies.
Perform spot-checks
In addition to scheduled cycle counts, plan to conduct unexpected spot checks to keep staff alert. In addition to ensuring consistent accuracy in inventory management, these checks are also effective deterrents for theft.
Schedule counts during low-activity periods
Conducting cycle counts during periods of lower warehouse activity can reduce disruptions and increase accuracy. Fewer activities mean fewer interruptions and distractions for the staff responsible for counting.
Consider cross-training staff
Cross-training allows employees to be competent in different areas of the warehouse or storage facility. The experience broadens their understanding and skill set, leading to greater flexibility and fewer mistakes.
Review and reconcile discrepancies
After a cycle count, always review discrepancies between the inventory records and what your team counts. Analysing these differences can provide insights into potential systemic issues or patterns that need addressing.
Engage in regular communication
Maintain open lines of communication with your warehouse team. Regular feedback sessions can help identify areas for improvement, and staff can offer insights into common challenges they face during counting.
Continuously review and refine the counting process
Inventory management is a dynamic process. Regularly review and adjust your cycle counting methods to accommodate changes in inventory levels, staff expertise or business needs.
Simplify stock control with MYOB
While cycle counting plays an important role in effective inventory management, having the right software can help you get better control over your stock.
With MYOB you can track what’s selling, automate reorders, oversee warehouse performance, generate reports and never run out of items again. Get more out of inventory with MYOB Business.
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