What Is Automated Inventory Cycle Counting in Warehousing?
Automated Inventory Cycle counting is the process of counting inventory in a warehouse in a timely basis. This helps to be sure that the inventory is up to date and accurate. It also helps to guard against stockouts and overages which can result in shipping and warehousing errors.
Conducting a cycle count is critical as it allows organizations to be sure that physical inventory SKU counts conform to their WMS records. In addition , if the WMS is integrated to an ERP, the ERP can be balanced against the WMS location inventory.
This process entails conducting a routine physical count and making necessary adjustments for specific SKUs.
Different Ways of Conducting a Cycle Count
There are a few different ways to conduct an inventory cycle count. The most common count process is to segment the warehouse into sections and count each section on a rotating basis. This will help to ensure that all areas of the warehouse are counted regular basis.
Another methodology is to count high-volume items more frequently than low-volume items. This helps to provide accuracy for items that are more likely to move. However, many inventory discrepancies are actually in the slowest velocity items.
Here are a few of the different ways you can cycle count your inventory:
- Location
This process is optimum for companies that have SKUs spread out across the warehouse or have an immediate inventory discrepancy that need to be resolved. - ABC analysis
ABC cycle counting method is a process of classifying inventory based on importance. “A” items being the most important and are counted more regularly than “B” or “C” items. “B” items are less important and are counted less often than “A.” “C” items are the least important and are counted the least often. - Time period
This involves counting inventory at a regular interval. Specifically, once a week, once a month, or even once a year. - Random sample cycle counting
Random sample cycle counting is a process where you select a random sample of items to count. In many instances, a WMS will suggest a sampling rate for performing the cycle counts based on velocity, value, etc.
What Are the Most Effective Ways to Conduct an Inventory Cycle Count?
The best method for you is contingent on your warehouse and what makes the most sense for your operation. You may even use a combination of processes. Before implementing a cycle counting program, consider the many options.For example, if you have a limited number of SKUs and they are stored in many varied locations, you might want to count by storage. This involves going to one location and counting all of the SKUs stored there, then moving on to the next location.
The best way to cycle count your inventory is the process that makes the most sense for your operation and your warehouse. There is no one “right” way to do it. It is of paramount important though for complete SKU counts to be performed, not just location counts! In many instances the total inventory count is correct, but the locations are incorrect. A complete count on the SKU will uncover and remedy these issues where a location only count, will not.
Experiment with varied methods and see what works best for you. Cycle count performance is a result that management will want to analyze to determine if any discrepancies are within a tolerance and to determine the best cycle to do the inventory of warehoused.
The Difference Between Cycle Counts and Physical Inventory Counts
It’s important to understand the difference between cycle counts and physical counts. Cycle counts are done on a regular basis (weekly, monthly, etc.) and count all the inventory in a selected area.A physical inventory count is conducted less often (yearly, bi-yearly, etc.). Often companies will have to shut down to perform a full, physical inventory. Which is why companies strive to reduce or eliminate physical inventories by having strict, successful cycle counting procedures. Many customers with a real-time WMS, never perform a complete physical count and this results in significant cost and time savings.
Inventory Cycle Count Benefits
Cycle counting helps businesses to become more proficient in their inventory management. Some of the benefits include:- Improved accuracy
By counting inventory items on a regular basis, businesses can ensure that their records are accurate. This helps to prevent stockouts and overages and improve customer service. - Increased efficiency
Cycle counting can help businesses to become more efficient in their inventory management. This is because it allows businesses to focus on specific areas of their inventory, rather than counting the entire inventory stock. - Reduced costs
Businesses can save money by avoiding the need for physical counts. This is because cycle counts are less time-consuming and labor-intensive as physical inventories often require shutting the operations down for a period. In addition, the need for a full physical inventory may be eliminated.
Explaining the Inventory Cycle Counting Process
The inventory cycle counting process is quite simple. First, businesses will select the area or areas that they want to count.Then, they will count the inventory in those areas and update their records accordingly. Finally, they will repeat the process on a weekly or monthly basis
How Often Should You Cycle Count Inventory?
This is a common question with no easy answer that fits all businesses. The frequency of your cycle counts will depend on the size and complexity of your inventory, as well as how quickly stock moves in and out of your warehouse.Our experience indicates that most warehouses perform cycle counts on a weekly or monthly basis. Some even count certain high-value or fast-moving items on a daily basis.
It is of importance to find a schedule that works best for you and your team. The preferred way to do this is to start with a few trial runs and then adjust as needed. Using a real-time WMS and eliminating manual/paper processes enables cycle counts to occur at any time.
When Should You Do a Physical Inventory Count?
A physical inventory count is a good idea if you suspect that your inventory counts are inaccurate. This could be as a result of theft, damage, or other factors. For 3PLs, clients will often contractually require a physical count.Physical inventory counts are also often mandated by finance/accounting in many cases.
Inventory Cycle Counting Best Practices and Tips
There are several practices for cycle counting, which include:- Identifying high-value items
Businesses should focus their attention on high-value items when implementing a cycle count. - Counting in small batches
Counting inventory in small batches will often improve accuracy. This is because it enables businesses to focus on a specific area and count the items more carefully. - Using technology
Technology can help to improve the accuracy of cycle counts. This is because it can be used to scan items and track inventory levels in real time. For instance, use a mobile device and a barcode scanner to speed up the process (WMS based). - Count inventory during slow periods
This will help to guard against disruptions to your operations. - Training employees
Employees should be trained on how to conduct a cycle count. This is because it will help to ensure that the process is conducted correctly. Mock or test cycle counts can help verify readiness of employees and the SOPs for the cycle counts. - Keep a running summary of inventory levels
This will help you to identify any discrepancies quickly. This ‘perpetual’ counting should always be occurring, and remedying issues quickly is important. A real-time WMS provides for normal day to day operations, perpetual counting. If inventory is incorrect, it is dealt with immediately!
By following these best practices, businesses can ensure that their cycle counts are accurate and efficient. This will help to improve inventory management and prevent stockouts.
How To Automate the Cycle Counting Process
There are several methods to automate the cycle counting process, which include:- Using WMS software
A WMS can be used to automatically implement cycle counting programs. This is because the WMS software can track inventory levels in real time and generate reports. - Using barcode scanners
Barcode scanners can be used to scan items and update inventory records automatically. This is a quick and easy way to count inventory. The barcode scanning will be part of a WMS.
How Does Core’s WMS Help with Cycle Counting?
Core e business solutions’ WMS helps with cycle counting by providing businesses with the ability to track inventory levels in real time via RF bar code scanning. In addition, Core’s WMS can be used to automate the cycle counting process. On-demand counting during normal operations is important.Also, the ability to implement cycle counting programs, such as A/B/C classification and inventory sampling, can satisfy finance requirements around frequency of counts. By using the Core Warehouse WMS system businesses can save time and improve accuracy.
Summary
Cycle counting is a vital part of inventory management. By following the best practices, businesses can ensure that their cycle counts are accurate and efficient. In addition, automating the cycle counting process can save time and improve accuracy. It can provide a significant ROI for companies who are currently performing cycle counts manually.If you would like to learn more about how Core e business Solutions’ Warehouse Management Solutions can help with cycle counting, please contact us today. We would be happy to answer any questions that you may have.