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  • Roy Strauss

Supply Chain Profitability - The Many Benefits of Cycle Counting

Traditionally, cycle counting has been done to improve inventory accuracy, to warn one of inventory shortages, for security reasons, and/or to eliminate the annual counting of inventory to satisfy accounting requirements.

Present day Supply Chain software whether it is ERP, WMS, or specific for inventory management typically includes features that in conjunction with barcode scanning or RFID can automate the cycle count process: for a variety of requirements; on a predetermined time schedule; with automatic update of results; and with automatic production of exception reports for follow up regarding discrepancies.

So with the ability to automate both counting and the count update, and to get key reports, cycle counting becomes an excellent management tool for: products of special interest; products with specific characteristics; or for many different reasons, such as:

To be notified immediately when fast moving products are in short supply to:

- Trigger rationing

- Be held aside for one’s best customers

- Have the Purchasing Dept. buy more product sooner and/or expedite receipt of existing orders

Check products that are:

- Easily resold or have had previous inventory shrinkage

- Very valuable that require close scrutiny

- Tiny and easy to conceal

- Easily damaged and can be discarded without notification to management

- Look similar to others or that can easily be mixed together, confused, or mis-picked

- From unreliable vendors with a history of errors in product supply and/or count

- Items whose facility balance on hand reach zero to both verify the out of stock situation in the facility, alert Purchasing to expedite the receipt of product from the supplier, and have the sales staff switch customers to similar products

- Continually changing case packs, or purchased from different vendors who use different case packs or packaging

- Products whose price changes frequently to alert a price change for new stock or with prices on the package such as a book to ensure FIFO

* Products stored in locations that are difficult to see or work with such as:

- Rear of double-deep locations

- The location is difficult to see from the ground

- Rack levels with multiple SKUs per level and no dividers, in which one SKU can easily end up behind or be mixed together with others

- Products that are difficult to identify, count or receive for any reason

- Products with any other characteristics that you suspect could have specific reasons for inventory shrinkage or error

Any item with a picking shortage should be cycle counted as soon as the discrepancy is recognized to:

- Find the missing product to give the customer what was ordered

- Update the system immediately if the shortage is real to avoid repeat of the discrepancy and create back orders in the system

- Order more of a shorted product quickly if the discrepancy is real

By being able to immediately recognize potential problems and designing the cycle counting system to alert management to prevent them, or to negate damage caused by them, one can serve customers better, improve operations, train staff to operate better, and reduce costs. When acquiring new software one should specify the different ways cycle counting might be done at your organization, the ways it in which it will be used, for which types of items and which circumstances will be addressed, and what kind of automated update and exception reporting will occur both at present and for changes contemplated for the future to ensure the software will serve the company’s needs properly


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