• 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 or excesses, for security reasons, and/or to eliminate the annual counting of inventory to satisfy tax/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.

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 managing 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

* For the Purchasing Dept. to buy more sooner and/or expediting existing order receipts

> Products that are easily resold or have had previous inventory shrinkage

> Valuable products that require close scrutiny

> Products that are tiny and easy to conceal

> Products that are easily damaged and can be discarded without notifying management

> Products that look like others or they can easily be mixed with others, or mis-picked

> Products from unreliable vendors with a history of errors in the product provided and/or the


> Items whose facility balance on hand reaches zero to 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

> A product with 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 or items such as books to ensure FIFO

> Any item with a picking shortage should be cycle counted as soon as the discrepancy is

recognized to:

* Find the missing product to send the customer what was ordered

* Update the system immediately if the shortage is real to avoid repeat of the problem

and create backorders in the system

* Order more of a shorted product if the discrepancy is real

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

* Rear of double-deep locations

* The upper level location is difficult to see from the ground

* Rack levels with multiple SKUs per level and no dividers, in which one SKU can easily

move behind or be mixed 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

By being able to immediately recognize potential problems and designing the cycle counting system to alert management to prevent and/or quickly resolve 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, the ways it in which the will be used, which types of items and which circumstances will be addressed, and what kind of automated update, reporting, 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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