Cycle counting, when done correctly, can be a key business process contributing to your organizations success. It can lead to improved inventory accuracy, reduced inventory costs, better customer service and happier employees. If implemented and used correctly, these benefit will be realized.
My experience as an inventory control professional has convinced me that a common problem in failed cycle counting implementations is not following through with a complete cycle counting program. A partial implementation, or following some, but not all of the guidelines listed below will not lead to the desired results.
Assign ABC Code to Parts
Some inventory items are more important than others. ‘A’ items are the most critical, expensive and have the most inventory dollars of annual usage. ‘C’ items are inexpensive and have low annual usage costs. ‘B’ items fall between the other two.
Determine Number of Cycle Counts to Complete Per Day
Determining the number of counts you can complete per day will help you determine how frequently you can count ‘A’, ‘B’ and ‘C’ items. Ideally, ‘A’ items should be counted monthly, ‘B’ items 3-4 counts per year and ‘C’ item annually.
Determine Tolerance for Each ABC Code
Acceptable count tolerances should vary by code. Low or no tolerance should be expected for ‘A’ items. ‘C’ items may have a plus or minus value of 5% or more.
Train Your Counters
Staff members assigned to the cycle counting efforts should be fully trained in your inventory handling procedures, inventory forms and obviously the cycle counting program itself. It is a best practice to use dedicated inventory personnel to execute the counts.
Count, Record and Report Your Results
Items to count need to be selected using the count code and frequency previously determined. These count results should be permanently recorded and reported. If the initial results are not as high as you want, be patient. The process will ultimately lead to improve accuracy.
Root Cause of Error Research
Search for the root cause of any count, location or storage approach errors. Be relentless in this effort. This is the single most important aspect of cycle counting as any solution should be applied to not only the item in error but for every other part in your warehouse.
Eliminate the Cause
Finding an inventory discrepancy should be received with a positive attitude. These errors are an opportunity to find and eliminate that type of error permanently and for every other item in your inventory.
The ultimate goal of cycle counting is to improve inventory accuracy. One huge secondary benefit is the possible elimination of the annual physical inventory process. That alone is worth the effort of implementing a cycle counting program.