Logistics & Materials Handling Blog

Cycle Counting 101

by Paul Hinz
Filed under: Logistics

Accurately tracking inventory can be an expensive task for many distribution centres. There are two main methods, which are used for maintaining inventory, physical inventory and cycle counting. Cycle counting, when done correctly, is seen as the more effective of the two and the majority of warehouses have moved or are moving towards cycle counting in order to maintain inventory.

Today we will cover basic information regarding cycle counting, from what it is, through to its benefits and why it is important.

What is Cycle Counting?

One can determine cycle counting as the process of counting a small and predetermined set of goods and materials frequently, as opposed to completing a full physical inventory each year. The objective of cycle counting is to determine records that are incorrect and correct the cause of the error.

Cycle counting

What are the Benefits of Cycle Counting?

Many companies find that cycle counting can take time to produce benefits within the beginning stages, however sticking with this method will result in significant payoffs, such as:

• Reduced costs through a decrease in downtime by ensuring business operations are not interrupted by a full-scale inventory audit.

• Quicker picking and therefore reduced order lead-time and improved order completion.

• Improved staff morale and confidence within the sales organisation that orders will be shipped as promised.

• Improved accuracy as warehouse staff can correctly identify and fix data.

• Increased productivity through eliminating operator time spent looking for lost or misplaced inventory.

• Reduction in returns due to improvements in picking within the warehouse.

The Importance of Cycle Counting

Cycle counting allows for an additional level of operational efficiency. Through constantly counting something, it ensures that one’s inventory is always organised and that committed inventory is correctly tagged as well as ensuring that transfers are processed and closed out.

Furthermore, cycle counting results in a shortened period between physical counts of any given item. This allows the opportunity to identify the cause of any inconsistencies, close procedural loopholes and improve upon human error.


What to Consider when Implementing Cycle Counting

• Cycle counting must become a part of your daily or weekly routine; otherwise, you will not gain the full benefits of the program.

• It is important to set up a schedule for cycle counting. This can be done through developing a periodic cycle count calendar to ensure everything is counted at least once within that period.

• It is essential to prepare the night before the actual cycle count to guarantee that the inventory is ready to be counted.

• One must close out any open inventory transaction before counting can start. All restocking from understock, overstock or back stock must be completed beforehand.

Types of Cycle Counting

Many cycle counting methods can be used:

• Control Group: This process focuses on a small group of items that are counted many times within a short period and is used when a company is testing the method to determine how to get the best results.

• Random Sample Counting: This is when a number of items to be counted are chosen at random.

ABC Cycle Counting: Used as an alternative to random cycle counting, this is when items within the warehouse are identified as A, B, or C. The items that have the highest sales value will then be counted more frequently.

Within any distribution centre, it is important to accurately keep track of your inventory not only to improve upon productivity within your business, but also to allow for customer satisfaction in receiving the correct product in a timely manner.