Thursday, August 21, 2008

Stock counting, cycle counting

Cycle counting and the process of counting some stock items or warehouse locations every day are a valuable tools in ensuring the accuracy of your perpetual inventory. We've seen numerous cases in which organizations, after implementing a comprehensive cycle counting program, have had a much more accurate perpetual inventory than they had when they performed full physical inventories. Because accurate on-hand quantities are vital to both providing outstanding customer service and maximizing inventory turnover, it is not surprising that more and more distributors and manufacturers are implementing cycle counting programs.

But cycle counting programs can be difficult to maintain over a long period of time. Many firms become frustrated with the "coordination" problems inherent in cycle counting that are usually not found in a full physical inventory. When companies conduct a full physical inventory, they temporarily halt all normal material movement – that is, they stop filling orders, putting away stock receipts, shipping material, etc. Before this is done, a special effort is made to ship as many orders as possible and put away all stock receipts. During the actual counting process the business is virtually closed down. Counters do not have to worry about someone doing something that will affect the quantity in stock during the full physical inventory process.

Extensive preparation is necessary for a full physical inventory. It is not practical to complete this preparation before each daily cycle count. It is equally difficult to conduct cycle counts only when a business is closed and there is no material movement. After all, cycle counting should be performed every day. Even if a company counts before or after normal working hours when there is little or no material movement, paperwork involving items being counted can be "floating" somewhere in the warehouse or office. For example, a quantity of an item may have been pulled from the shelf but not yet shipped. Or a stock receipt for a product may have been put away but not yet entered into the computer system.
This simple process has the potential to dramatically cut the time necessary to perform daily cycle counting. No longer will people roam around your facility trying to determine if a particular order was picked or put away before or after a product was cycle counted. The result: More accurate inventories with less effort and frustration, a winning combination for any organization. This method could turn out to be a very valuable tool in your quest to achieve effective inventory management!

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