There are several forms of cycle counting that are popular in the warehouses, but most importantly are the basic traits they have in common. For instance, the cyclical nature of the inventory count makes it stand apart from annual inventories. Here are a few of the basics you need to know.
It's Continuous and Cyclical
Given the name of the system, you should understand that cycle counting involves putting your products into a cycle where they will be counted at regular intervals. However, unlike an annual inventory that involves stopping everything you're doing to count every single product at once, cycle counting breaks down your inventory into manageable chunks that can be done each day, week and month. Then when they're all done, a fresh cycle begins.
It Allows For Targeted Assessments
The biggest problem that companies face with annual inventories is the large gap in data that happens from one year to the next. This often results in unexpected losses and discrepancies, especially in high dollar items because nobody was checking in between counts. With cycle counting, it is possible to break your items into groups according to their value and priority in your overall operation. Thus, your most precious items can be counted more often in the cycle than your low value items. When this happens, you have more consistent data and less shrinkage because there is no room for discrepancies to accumulate over time and get out of hand.
With annual physical inventories, the counting process becomes more unwieldy as your business expands, meaning that you have to pause operations to get the count done, or you have to hire extra help just for this task. By breaking your inventory counting into smaller, manageable cycles, you will be able to expand at your pace without causing a breakdown during inventory time.
When the annual physical inventory time rolls around, most companies enlist the help of all their staff to get the counting done. From the guy in the mail room to the highest managers, everybody is on the floor counting, re-counting, and sorting. During this time, customers often go unloved and other responsibilities become low priority. Plus, you discover that some of your staff members just don't have the patience or eye for counting accurately, which only leads to more confusion and re-counting. With cycle counting, you have a team of dedicated individuals who count every day of the week. They are trained in the art of counting and can deliver consistent results day after day. There are mechanisms in place to weed out those who do not have the proper skill set to count your inventory.
These four basics are the reason so many companies are choosing cycle counting over annual physical inventories. Cycle counting gives you a more accurate and consistent view of your total inventory, while reducing disruptions and costs associated with inventory management.