Cycle counting is a perpetual inventory auditing procedure that involves regularly repeated sequence of checks on a subset of inventory. It is a method of checks and balances by which companies confirm physical inventory counts match their inventory records. Cycle counting is different from traditional physical inventory in that it is an ongoing process that involves counting a small amount of inventory in the warehouse each day, with the intent of counting the entire inventory over a period of time. The key differences between cycle counting and physical counting are that cycle counting is an ongoing process, while physical counting is a one-time event, and cycle counting involves counting small samples of inventory while making sure that everything eventually gets counted over a determined period of time.
Cycle counting can be used to identify root causes of problems in control processes and then monitor the effectiveness of the actions to eliminate the root causes. It can help minimize interruptions in the warehouse, reduce required safety stock, lower overhead costs, and make physical counts less painful. The items selected for cycle counts can be defined based on many sort criteria, such as most used or highest cost, and the most commonly used method is simply to start in one corner of the warehouse and progress through the various aisles and bins, so that all items are counted on a rotating basis.
The following steps are required for a successful cycle counting program:
- Enter all transactions
- Print counting report
- Compare actual inventory to report
- Investigate and resolve discrepancies
- Audit inventory and calculate inventory accuracy percentage
- Post results in a public place and pay bonuses to the warehouse staff if they attain predetermined record accuracy goals.
Regular cycle counting is an important means of checks and balances, ensuring items on the shelves match inventory records. Implementing periodic cycle counts into everyday tasks can help manage inventory counts and maintain inventory accuracy.
