How do you use inventory cycle counting to save time and money?

1 What are the benefits of inventory cycle counting?

Inventory cycle counting can provide several benefits, such as avoiding the disruption and expense of a full physical count, maintaining customer satisfaction, preventing inventory shrinkage, optimizing inventory levels, and improving inventory accuracy. This can help reduce the costs and risks associated with inventory management. Moreover, it can ensure that you have the right products in stock and ready to ship. Additionally, it can prevent overstocking or understocking, which can impact cash flow and profitability. Finally, it can enhance your decision making and planning.

2 How do you plan your inventory cycle counting?

Before you start your inventory cycle counting, it is important to plan how you will select, schedule, and record your samples. Firstly, decide on the frequency and timing of your inventory cycle counting; it can be done daily, weekly, monthly, or quarterly, depending on your business needs and inventory turnover. Secondly, choose a method for selecting your samples – you can use a random, systematic, or stratified approach. For example, a random approach involves picking items randomly from your inventory while a stratified approach involves grouping items by categories such as value, demand, or location. Thirdly, assign roles and responsibilities to your staff; counters will physically count the items while auditors will verify the counts and compare them with records. A manager should oversee the process and resolve any issues or discrepancies. Lastly, document your inventory cycle counting procedures and policies; this includes having a clear and consistent way of recording, reporting, and correcting your inventory counts as well as tracking your inventory cycle counting performance and progress.

3 How do you execute your inventory cycle counting?

Once you have planned your inventory cycle counting, you need to execute it according to your procedures and policies. To ensure a successful count, it's important to use a barcode scanner or mobile app to scan items and record the counts. Additionally, count the items in their original locations and do not move them until the count is verified. A count sheet or card can help organize and track counts, while a variance report or discrepancy report can record any differences between physical counts and records. Finally, use a cycle count adjustment or inventory adjustment to update your records with the actual counts, helping maintain inventory accuracy and integrity.

4 How do you evaluate your inventory cycle counting?

After you have executed your inventory cycle counting, you need to evaluate its effectiveness and efficiency. To do so, you can calculate your inventory accuracy rate, which is the percentage of items that have matching counts and records. This is done by using the formula: (Number of Items with Matching Counts and Records / Total Number of Items Counted) x 100. The higher the rate, the better your inventory accuracy. Additionally, you can calculate your inventory discrepancy rate, which is the percentage of items that have different counts and records. This is done by using the formula: (Number of Items with Different Counts and Records / Total Number of Items Counted) x 100. The lower the rate, the better your inventory accuracy. Furthermore, you can calculate your inventory shrinkage rate, which is the percentage of inventory that is lost due to theft, damage, or misplacement. This is done by using the formula: (Inventory Value at Cost According to Records - Inventory Value at Cost According to Physical Counts) / Inventory Value at Cost According to Records x 100. The lower the rate, the better your inventory control. Lastly, it's important to monitor and compare your inventory cycle counting metrics over time and across categories in order to identify any trends, patterns, or anomalies in your inventory performance and quality.

5 How do you improve your inventory cycle counting?

To improve your inventory cycle counting, you need to continuously review and refine your process and practices. Setting realistic and measurable goals and standards, training and educating staff on the importance of inventory cycle counting, utilizing technology and tools to automate the process, and implementing preventive and corrective actions are all essential steps. For example, you can aim for a certain inventory accuracy rate or use a cloud-based inventory management software or a RFID system to track and update your inventory in real time. Additionally, conducting root cause analysis, performing audits, or improving security measures can help address any discrepancies. With these tips in mind, you can use inventory cycle counting to save time and money for your business.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?