The Concept Of Cycle Counting

Tracking inventory accurately would be an expensive method for many business distribution centers. Mainly there are two main methods, which are used for maintaining inventory:

1. Physical inventory
2. Cycle counting.

Cycle counting when done is said to be most effective of the two methods, now a day most warehouses prefer to go with the method of cycle counting in order to maintain inventory.

What is cycle counting? The inventory auditing procedure that falls under the head of inventory management is cycle counting. Mainly, it allows most of the businesses to measure the count of goods and products available in different areas of warehouse. It basically focuses on determining the accuracy of goods in warehouse. There are in total 6 different approaches and methodologies used for cycle counting which are listed below:

1. Random Sample Cycle Counting
2. ABC Cycle Counting
3. Process Control Cycle Counting
4. Opportunity Based Cycle Counting
5. Transaction Based Cycle Counting
6. Location Based Cycle Counting

Random Sample Cycle Counting

As the name states, a random sample generated from the inventory records and counting the items associated with it is called random sample cycle counting. Sample is usually generated on the basis of constant population or inventory having diminishing track record. Random sample cycle counting can be used in the warehouses with large quantities of similar products.

ABC Cycle Counting

ABC cycle counting is quite similar to random sample cycle counting but uses Pareto’s law to categorize the products into 3 different categories. All these categories are based on the importance/ annual usage of the product or it can be based on the length of lead time. Goods with ‘A’ stand at the highest rank, while ‘B’ and ‘C’ ones have lesser and least rank respectively. Priorities of the organization are usually subjective. ABC investigation is a technique for allotting and ordering SKU's. For the cycle tallying technique, SKU's are positioned from most noteworthy to least considering the yearly deals volume at cost. The thought behind this positioning depends on the 80/20 lead, where 80% of the volume in the stockroom originates from just 20% of the SKU's. Table B is a case of an ABC investigation. “A” thing represent the main 80% of offers, while "B" things represent the following 15% of offers, and "C" things represent the last 5% of offers. Commonly, more than half of the things are "C" things. Understanding this examination demonstrates that 80% of offers or volume originates from a little level of things.

ABC Calculations

Putting together an ABC analysis is really quite simple as long as the data is in a format that can be manipulated on a computer. The requirements are SKU Numbers, Units On Hand, Unit Sales for a 12-Month Period, and Last Cost per Unit. As long as this data is available, inventory on hand and annual sales can be calculated. Follow these steps:

1. Calculate annual usage, in dollars, for each SKU
2. Rank (sort) the SKUs' descending order based on annual dollar usage
3. Assign ABC classifications based on the criteria described above.

Process Cycle Counting

Warehouses where goods are easy to count use Process cycle counting since it is faster and requires significantly less counters. During the application of this method the cycle counter is free to determine whether or not to count at location based.

Opportunity Based Cycle Counting

This cycle counting methods involves counting items having some opportunity in itself at particular key events in the process. This opportunity can be either restocking of goods or goods below threshold level. Transaction Based In this method, count of inventory is done when a set of transactions involving the particular product happens. Location Based Location based cycle counting particularly focuses on products located at different locations that can be counted. Until all the stock is counted cycling through different areas goes on.

Cycle Counting based on Warehouse

To gain clarity in the warehouse management it is the nature of the warehouse management count the inventories physical, it’s a very costly exercise to count the stock physically. Not exclusively does it strike fear into the hearts of the individuals who must count each bit of the stock however it is unbearable for warehouses executives. Inventory inceptions drive precision inside the four dividers of an office, however they completely disrupt operations, thereby eliminating any potential revenue for the time they are down. They are dependent on labor, requiring extra time pay. They additionally uncover critical holes in precision that were likely obscure before the review, and more essentially, regularly remain a riddle following. How does cycle counting work? The process is entirely based on what is right for each organization. The facilities control their inspections by dynamically choosing what they want to inspect. For instance, we should give more importance to the product with highest value or fast-moving products for more regular inspections as that tend to be more prone to errors. You may also accommodate seasonal items or peak season item or peak season items when appropriate.

5 ways Cycle Counting Improves Accuracy

Here are 5 ways that cycle counting, along with a warehouse management system, can improve accuracy in your warehouse.

Elimination of Physicals

In an inheritance innovation or paper-based condition, physical tallying requires a generous measure of in advance arranging, also work stoppage. You can kill downtime, additional time pay and the committed assets required to perform physicals with a cycle checking.

Better Utilization of Employee Time

Persistent process control, check, and approval of stock costs prompt a substantially more gainful satisfaction focus. In general work efficiency will forcefully increment as partners invest more energy moving item and less searching for it.

Higher Fill Rates

Better take care of client demand with an enhanced first pass yield. With a higher fill rate, you will dispense with delay purchases and lost deals.

Identity the Root Cause of Issues

Physicals decide precision issues inside your distribution center, yet cycle tallying goes considerably facilitate by helping you to decide the basic reasons for issues. You can run examination against these checks and attach the issue back to a seller that is pushing awful items or a representative that is taking.

Better Purchasing

With consistent cycle tallying, your group will profit by a higher trust in the precision of your framework checks. This surety of data empowers chiefs to settle on better buying choices, yielding more productive utilization of distribution center limit, enhanced space usage and less capital tied up in overabundance stock.