The benefits of cycle counting can have a significant impact in managing your inventory levels and improving your bottom line. Managing your inventory successfully means having enough inventory on hand to fill customer orders without having too much which consumes cash. In the past warehouses performed annual physical inventories. This often shut down the warehouse, redirected staff to counting inventory, and forced management to spend hundreds of dollars spent on pizzas and sodas.
Cycle counting is the ongoing process of counting and validating the accuracy of inventory. If done correctly, it can eliminate the need for traditional physical inventories. Implementing a cycle count program requires strategic planning but as a rule high volume products are counted in more frequent intervals than low volume products. The cycle count process can also be interleaved into other warehouse functions such as put away, moves and picking.
An analogy that is often used is regular car maintenance. If you take your car into the shop for regular checkups and maintenance, the car performs optimally, there are fewer long term issues, and potential problems are identified before they become catastrophic. Cycle counting is regular inventory maintenance.
The benefits of cycle counting are:
- Increased Inventory Accuracy – The traditional physical inventory count catches inventory inaccuracies one or twice a year depending on the frequency of the counts. However, cycle counting resolves inaccurate inventory levels more frequently.
- Reduced Inventory Shrinkage – When you increase the frequency of your counts, you also have the ability to identify and resolve problems related to shrinkage.
- Eliminate the Annual Audit – Most companies that perform regular cycle counts are able to eliminate or greatly reduce the annual physical inventory audit. This will save time to prepare for the audit as well as the costs of the auditors themselves.
- Faster and Better Decision Making Regarding Inventory Levels of Specific Products – The improvements in inventory accuracy benefits both purchasing and sales departments. Managers can make decisions about reorder points and promotions more quickly and in response to shifts in the market.
- Improved Warehouse Efficiency – Improved inventory accuracy also provides the warehouse manager with information that can be used to streamline warehouse operations. Less time is spent searching for “lost” inventory and can be reallocated to more productive tasks.
- Eliminate the Costs Associated with Traditional Physical Inventories – As stated earlier, cycle counting can replace traditional physical inventories. There is no need to shut down distribution operations for lengthy physical counts. Costs are reduced as staff is not redirected to perform counting tasks.
Implementing a cycle count program can provide many improvements to your distribution and manufacturing operations. Working with both your internal team and software provider will help you create a strategic plan for executing your program. While there are many benefits of cycle counting, remember that your cycle count strategy should be monitored, revised and improved as needed over time.