Companies who must manage inventory face the challenge of finding new ways to improve processes and overall efficiency. One popular inventory management technique to accomplish these goals is cycle-counting. In cycle-counting a subset of inventory is counted on a recurring schedule, on specific days, in a designated location.
These types of programs help replace the need to conduct once-a-year physical counts. They also provide an opportunity to count certain items on a more regular basis. Other benefits of cycle-counting inventory include:
- Increased confidence in buying decisions
- Lessen errors with shortened time between counts
- Limited disruption throughout warehouse
- Increase inventory accuracy
Mark Tomalonis, President of WarehouseTWO, provided some great insight on establishing a cycle count program, which we’ve summarized below. If you already have a cycle count program established or are thinking about creating one, asking yourself the following questions can ensure you are set up for success.
Who in your company is performing cycle counts?
One of the biggest struggles for warehouses who are implementing a new cycle-counting program is determining who will be responsible for performing the actual count. Many people might think that supervisors should be responsible, but typically it is best to have your warehouse staff complete the task.
By having your own staff count product, it helps to encourage pride-in-work and often results in greater inventory accuracy.
How will you train those responsible for cycle-counting?
Having the best process in the world means nothing if your staff aren’t properly trained on how to go about performing the task. To help ensure that the cycle-counting program is effective, there needs to be a proper training program. Usually making step-by-step instructions openly available to everyone will help cut down on the learning curve and avoid mistakes and errors.
How much time per week do you intend to have your employees spend on cycle-counting?
With cycle-counting you want the process to be highly efficient and to do that you need reasonable expectations. One way to determine what is reasonable and what is not is by performing sample batches. By using an average cycle-count batch size, inventory can be counted quickly.
For difficult-to-count items such as ones that must be moved by a forklift, you will want to adjust the batch size. This allows the staff time to finish the count in a timely manner.
Does your warehouse have formal bin locations?
One of the most important parts of creating cycling-count batches is having accurate item/location assignments and records in your ERP system. Having a formal bin location will help warehouse workers put away items in their assigned locations. It will also let your ERP system know where each item is located throughout the facility.
Do you control the receiving, storing, and picking of items by “lot”?
Some companies will manage their inventory by placing items into specific lots. If your facility currently utilizes lots, then it is important to take that into account when establishing your cycle-count batches. In some instances, you can use the groups lots together to make the batching process easier and more efficient.
Will your cycle-counters have access to a counting scale?
Depending on the type of items you have in your facility, a counting scale pay be extremely beneficial. For example, staff that are working with light-weight items that are stocked in the dozens or hundreds will be more efficient and accurate when using a scale.
Is access to your warehouse restricted to only authorized employees?
One potential weakness of a cycle-count program is the ability of outside sales reps to remove products from the warehouse. Most of the time the reason for the removal is to show a customer an item, but it often doesn’t end up back in the warehouse. To ensure products are brought back a formal tracking program should be put into place.
What process will you deploy to catch poor quality work and/or cheating?
Accidents and errors can happen to anyone. However, if there are workers who are constantly performing poorly or are trying to cheat the process then it could have negative effects on the cycle-count. Having a plan in place to identify, catch, and fix these mistakes is necessary if you want to avoid an issue with an audit later in the year.
How will you ensure that cycle-count batches are performed on schedule?
Consistency is the key to an effective cycle-count program. Once you determine the cadence at which you operate the count, getting behind schedule is not a viable option. If your team falls behind and misses a count deadline it can have a significant impact on your ability to track inventory.
How will you determine which items are to be counted in each cycle-count batch?
For cycle-counting best practices, it is recommended to count your most active items at least four times per year. Other items with less movement should be counted at least twice. You will need to keep an eye on sales trends with products in the warehouse. If you notice a product is becoming more active, then there might be a need to count it more frequently.
WarehouseTWO, LLC is an independent “inventory-sharing” service created exclusively for durable goods manufacturers and their authorized distributors, and for any group of durable goods “peer” wholesaler-distributors, such as members of a buying/marketing group or cooperative. To learn how inventory-sharing with WarehouseTWO can help your business, visit the WarehouseTWO website, or email firstname.lastname@example.org.
About Tribute, Inc.
Tribute, Inc. provides ERP business management software, TrulinX, for industrial distributors and fabricators in the fluid power, motion control, and automation industry and is integrated with WarehouseTWO to facilitate excellent servicing of your customer's inventory needs.
To learn more about Tribute's industry expertise and how TrulinX software can benefit your organization, request a demo today.