What is Cycle Counting and How to Check your Inventory Mismatches

Introduction

When making business decisions, accuracy is crucial. Accurate and up-to-date inventory information is necessary for flawless manufacturing productivity and the best customer service. The mismatch between inventory records and the actual stock on hand is caused by a variety of factors. It also includes faulty processes, several transactions in inventory, incorrect data entry, misplaced goods, and internal theft. 

Correcting these errors is necessary, but it’s important to maintain business operations. In short, businesses must audit inventories with the least amount of interference to regular operations.

Cycle counting is a method of inventory verification that can be used to achieve this. It is a common sampling approach that periodically counts small amounts of stocks within a specified time frame without interfering with daily stock activities. The cycle count procedure corrects the mismatches between the stock units on the shelves and the inventory data. 

You will learn all the essential information and important details. This requires you to understand the cycle counting procedure from this post.

Article Content-

1. What is Cycle Counting?
2. Why is maintaining inventory accuracy dependent on cycle counting?
3. Advantages of Cycle Counting for Inventory Management:
4. How can you effectively cycle count your inventory?
5. Conclusion

What is Cycle Counting?

Cycle counting is a method of counting inventory that is periodic and used to track inventory levels. Cycle counting involves physically counting every stock unit at least once. This is a small section of an inventory periodically throughout the year. Typically, it is carried out by skilled “warehouse counters”. Who continue counting stocks without interfering with normal business. Even when counting is in progress, the counters create a system for tracking goods through the warehouse maze easily.

Why is maintaining inventory accuracy dependent on cycle counting?

Inventory counts are crucial for product-based businesses to reconcile physical inventory numbers. The physical inventory count must agree with the official inventory records to achieve inventory accuracy. Companies may vastly enhance the error eradication rate with the cycle counting procedure. Even though they cannot eliminate all inventory errors.

How does it function?

For operational purposes, you must match the count of inventory on books with the actual units kept in the warehouse. While for audit purposes, you must match the cost of inventory on books to the cost of inventory in the warehouse.

There are two ways to do this:

1. A physical count of the entire inventory (once a year)
2. Cycle counting (continuous throughout the year)

1. Physical count of the entire inventory

Physically verifying or physically counting the entire stock is an extensive activity. That demands a skilled workforce, plenty of resources, and a complete cessation of activities. A warehouse facility’s operations are paused so that all items can be counted simultaneously. Thus, it is not always possible to do a physical inventory count. A useless counting exercise might also result from errors at the end of unresolved inaccuracies (without solving the actual pain points).

2. Cycle counting

The drawbacks of the physical counting method as a whole are reduced by cycle counting. Cycle counting employs a unique method that involves frequently counting only samples or certain goods. Priority is given to the most fluid stocks. The cycle count method causes minimal disruption to regular business activities. Only the portion of the warehouse where the cycle count is being performed needs to be stopped. The rest need not be stopped at all. Even if there are errors throughout the entire inventory count procedure, they are found in the sample count.

Advantages of Cycle Counting for Inventory Management

• The amount of inventory is significant and valued on company balance sheets. Thus, to maintain accurate financial records, physical inventory inspection is crucial. Investor sentiment is maintained because cycle counting maintains the accuracy of the number.
• Cycle counting is less time-consuming than the actual inventory count at the end of the year, so the workforce isn’t overloaded.
• To keep the manufacturing levels balanced, accurate inventory data is crucial. Operations in production and sales are kept streamlined and unhindered by cycle counting. There is no need for your sales department, retailers, distributors, stores, etc. to deal with the stock-out problem.
• Mismanagement and instability in the warehouse can result from missing stocks. Searching for missing objects is a time-consuming endeavor. It is a simple procedure for inventory count reporting and error detection. Cycle counting provides quicker insight into shipping problems, complicated inventory transactions, and fixed issues.
• There must be enough physical stock in the warehouse to fulfill any orders. The order fulfillment procedure might be delayed if your record books and physical objects don’t match. Cycle counting makes it easier to complete orders. Cycle counting makes it possible to produce things in limited quantities, which prevents order backlogs.
• How well your inventory management is done will determine how effective your distribution plan, multi-location management, and supplier management are. Stocking and distribution choices are assisted by cycle counting.
• It lowers the amount of out-of-date stock in the warehouse and reduces the costs associated with carrying extra inventory.

How can you effectively cycle count your inventory?

For efficient cycle counting, it is important to have a well-thought-out strategy and checklist on hand. You can improve your cycle counting procedure by following the tips and practices below:

Guidelines:

• Gather historical inventory information and past error records. This will gain a better understanding of potential discrepancy zones.
• Distribute the responsibilities connected to counting each employee with the appropriate instructions and counting tools.
• Create schedules, protocols, and SOP to ensure accurate tracking and management reporting.
• Be clear about the auditing criteria and collect prior input, feedback, and suggestions from auditors.
• Your digital records should be updated and audited before the cycle count.
• Create a system for tracking crucial parameters.
• Stop order picking and stock movement in the area designated for the inventory count to prepare the warehouse.
• A count sheet that has been created should be updated with all objects and their categories.
• Cycle count high-value, high-volume items first using the techniques covered in the article. Based on your needs, select the right cycle counting model.
• Consider having items that can’t be physically counted or weighed on regular scales. (For example, nails)

Conclusion

Without the proper software, cycle counting hardware is of limited use. To overcome labor shortages and inefficiencies, the modern warehouse needs strong tools. Your productivity and revenue may suffer if cycle counting technology is not implemented. Even outdated barcode software is not much more efficient than manually counting inventories.

To simplify every aspect of material management, look to mobile inventory solutions. This goes beyond simple cycle counting mobile apps. Mobile barcoding can improve inventory cycle counts without interfering with business activities. And it can even supplement your warehouse with offline cycle counting.