How can you set up a cycle count program?

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Cycle counting is an inventory control method that involves counting a portion of stock items regularly, rather than conducting a full physical inventory annually. This approach can help you maintain accurate records, reduce errors, save time and money, and improve customer satisfaction. In this article, you will learn how to set up a cycle count program for plant engineering operations. This includes selecting the items to count, determining the frequency and schedule of counting, assigning roles and responsibilities, conducting the count and recording the results, analyzing and reconciling discrepancies, and implementing corrective actions and improvements.

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1 Select the items to count

The first step in setting up a cycle count program is to decide which items you want to count and how you want to group them. You can use different criteria to classify your items, such as value, usage, turnover, or location. For example, you can use the ABC analysis method, which assigns items to three categories based on their annual dollar value: A for the highest value items, B for the medium value items, and C for the lowest value items. You can also use other methods, such as the XYZ analysis, which groups items based on their demand variability, or the FSN analysis, which groups items based on their freshness or obsolescence.

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kristine babic

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I agree with the ABC method of set up. Keeps things in perspective for everyone plus it makes sense. To me it always makes sense to break things down by dollar. It’s important for everyone to know what inventory costs especially when there is a high rate of turnover over.

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2 Determine the frequency and schedule of counting

The next step is to determine how often and when you want to count each group of items. You can use different methods to calculate the frequency of counting, such as the fixed interval method, which counts each item at a regular time interval, or the fixed frequency method, which counts each item a certain number of times per year. You can also use a combination of both methods, such as counting the A items more frequently than the B and C items. You should also consider the availability of resources, the seasonality of demand, and the impact of counting on your normal operations when scheduling your counts.

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kristine babic

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I like to have a total of 3 counts per year. Two in a cycle count program and then a final year end count. I’m a bit old school when it comes to inventory and weirdly treat it as a living thing sometimes. It needs to be fed properly and maintained otherwise you have problems.

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3 Assign roles and responsibilities

The third step is to assign roles and responsibilities to the staff involved in the cycle count program. You should have a clear division of tasks and accountability among the cycle counters, the supervisors, the inventory managers, and the auditors. You should also provide adequate training and guidance to the cycle counters on how to perform the counts accurately and efficiently, using the appropriate tools and procedures. You should also establish a communication system to report and resolve any issues or questions that arise during the count.

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kristine babic

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I like to have counters be people who don’t normally have much to do with inventory. In my experience people who don’t know what they are counting are more likely to pay closer attention and ask questions. Those that are “in charge” of the inventory would be the checkers that way they are available for questions and can be sure the count is done properly.

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4 Conduct the count and record the results

The fourth step is to conduct the count and record the results. You should follow a standard process to ensure consistency and reliability of the count. You should also use a verification method to check the accuracy of the count, such as a blind count, a double count, or a random sample. You should record the count results using a suitable format, such as a paper form, a barcode scanner, or an electronic device. You should also document any discrepancies or adjustments that occur during the count.

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5 Analyze and reconcile the discrepancies

The fifth step is to analyze and reconcile the discrepancies between the count results and the inventory records. You should compare the count results with the inventory records and identify the causes and sources of the discrepancies, such as data entry errors, theft, damage, misplacement, or shrinkage. You should also update the inventory records to reflect the count results and adjust the inventory values accordingly. You should also report the discrepancies and the adjustments to the relevant stakeholders, such as the finance department, the purchasing department, or the customers.

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6 Implement corrective actions and improvements

The final step is to implement corrective actions and improvements to prevent or reduce the recurrence of the discrepancies and to enhance the performance of the cycle count program. You should analyze the trends and patterns of the discrepancies and identify the root causes and the potential solutions. You should also monitor and evaluate the effectiveness of the corrective actions and the improvements and make any necessary changes or modifications. You should also review and update the cycle count program regularly to ensure its alignment with your inventory goals and objectives.

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7 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?

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How can you set up a cycle count program?

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1 Select the items to count

2 Determine the frequency and schedule of counting

3 Assign roles and responsibilities

4 Conduct the count and record the results

5 Analyze and reconcile the discrepancies

6 Implement corrective actions and improvements

7 Here’s what else to consider

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