The Benefits of Cycle Counting

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The ultimate dream for most manufacturing and distribution companies is to completely eliminate the need for physical counts and instead rely upon cycle counting to keep their inventory numbers up-to-date. Inventory management and inventory counting tools such as smartphones, tablets, and inventory counting software (including barcode scanners) can help companies achieve this dream. While they do not eliminate the need for inventory counting, these devices make it easier for companies to count inventory on a more regular basis. If the inventory data is updated constantly, there is no need for lengthy physical counts.

Cycle counting is the continual process of validating the accuracy of inventory in your company’s ERP or accounting system by regularly counting a portion of your inventory. This can occur on a daily or weekly basis, depending on your preferences. Cycle counting ensures that every item in your inventory is counted at least several times a year. Companies who perform cycle counts regularly rarely ever have to shut down to perform physical counts. It’s simply too expensive to shut down for the day, and if they are constantly cycle counting, there is no need to shut down.

Besides the obvious benefit of eliminating the need to perform a yearly physical count, cycle counting provides businesses with many benefits, including:

  • Improved operational efficiency
  • Improved customer service
  • More accurate inventory records
  • Sales increases
  • Shortened periods of time between physical counts of any given item in the warehouse
  • Reduced errors
  • Fewer inventory write-offs

Implementing your cycle counting program

Have the above benefits convinced you of the value cycle counting can bring to your company? If so, it’s time to implement your cycle counting program for optimal inventory management. Keep the following tips in mind as you develop your cycle counting plans:

  1. In order for cycle counting to do you any good, it MUST become a part of your daily or weekly routine. Too many companies make the mistake of not counting their inventory often enough. If you rely on sporadic cycle counts, you will only receive sporadic results. You can only get the full benefit of cycle counting by counting your inventory on a regular basis (either daily or weekly).
  2. Create a schedule for cycle counts. Your company is unique, so you must create the schedule that works best for your company. However, we recommend developing a 13 week cycle counting calendar. This will ensure that every item in your warehouse is counted at least once during the 13 week period.
  3. Plan and prepare before you start counting. As we discussed prior to this blog, preparation is key to a successful physical count, and the same is true for cycle counting. Make sure that your warehouse is organized and that you have a plan in place for the inventory counting process.
  4. Close any open inventory transactions that you are counting before you begin. Make sure that you’ve completed all overstocking, understocking and back stocking before you start counting inventory. All received orders need to be received in your ERP or accounting system and put away. If you have transactions that are still open, they will need to be reconciled with your count before closing and posting the cycle count.
  5. Start with a small portion of inventory. Cycle counting should not overwhelm you; it’s meant to ease the stress involved in inventory management, not add to it. Start out small and work your way up. Don’t try to count your biggest or most popular item right away. Start with items that have less movement. Take the time to learn how your inventory counting software works and familiarize yourself with the cycle counting system before you jump into the process.

The most difficult part of cycle counting is getting started. While it may take you 13 weeks to finally get the hang of it, you will soon excel and forget why you relied on yearly physical counts. If you are looking for a solution to make the cycle counting process easier, contact us today. We offer a variety of inventory counting resources, including barcode scanners, Sage 100 (formerly MAS 90 / MAS 200) and Sage 500 (formerly MAS 500) barcode software, and Sage 100 mobile applications.

Does your company perform yearly physical counts, or do you rely on cycle counting to keep your inventory data up-to-date?