Thursday, August 21, 2008

Physical Inventory and Cycle Counting

Most companies count their fast-moving items more often than their slow-moving products. And some products are easier to count than others. As a result, the "cost of counting" can vary from one item to another.

In calculating the counting element of the carrying cost, we usually start by grouping similar stocked items that are stored in similar storage units. We then determine the average number of products in each group that can be counted in one hour as well as the labor cost of performing the count. This cost includes the time spent:

* Performing the actual count
* Entering the count information into the computer system
* Reconciling any discrepancies in the count

The total cost per hour is divided by the number of products that can be counted in that hour. The result is then multiplied by the number of times each product is scheduled to be counted in a year to arrive at the total cost of counting a specific product.

No comments: