Cycle Counts

Warehouse management imageOne of the most important aspects of warehouse management is maintaining accurate inventory counts.  It sounds simple but with the multitude of potential errors that can take place in a shipping operation, keeping inventory counts correct is an ongoing battle.  One that must be fought proactively.  In most cases, once an error is identified, the problem has already caused damage that will take time and resources to correct.

The first steps which must be taken to solve this issue is to make sure that you are correctly inputting new inventory that comes in –  and correctly reducing inventory that has been sent out.   If you have strong procedures in these two areas, you will be well on your way to accurate inventory counts.  But the majority of the errors that occur take place in between these two actions.  There are dozens of ways for a warehouse employee to cause errors.  Mispicks, miscounts, shrinkage, damaged inventory and returns order management are all common issues that impede accurate inventory counts.

One tried and true method for inventory control is the manual inventory count.  Simply counting all of the items in a warehouse as regularly as possible is an obvious way to make sure counts are right.   This will allow for the identification of discrepancies and should trigger the subsequent research of the cause.  But most warehouses are very busy.  Some operate 24 hours a day and 7 days  a week.  So when can a full inventory count take place without completely shutting down the operation?  The answer is never!  The alternate answer is that since busy warehouses cannot conduct full physical inventory counts, they must utilize the cycle count.

The cycle count is a method of counting inventory which deos not require a full warehouse shutdown.  This is possible because cycle counting is the process of the periodic counting of small segments of inventory.  By handling the counting process this way, the warehouse can continue uninterrupted operation.  But it also means that the counting process is an ongoing one.  In order to get around to all of the inventory in a warehouse, resources must be allocated to cycle counts regularly – every day in some cases.

The most common method of cycle counting is the ABC analysis method.  This method utilizes the Pareto Principle.  The Pareto Principle is based on the assumption that roughly 80% of the effects come from 20% of the causes. When applied to warehouse inventory this means that 20% of the items in a warehouse represent 80% of the business and accompanying errors.   Warehouses define the items that are the most important and count those items most frequently.  A items are the ones that have the most value and are ordered the most.  Items that have less value and are shipped less are given  B item status.  The least important items are given C status and will be counted the least often.  Each SKU in the warehouse must obviously be assigned a status.  Once that has been established, a warehouse management software is generally utilized to dictate when counts must be conducted.

Utlizing barcode scanners in a warehouse is quickly becoming the norm.  It allows warehouses to operate more efficiently and keep detailed records of which employees handled which transactions.  When conducting inventory counts, barcode scanners allow for the most accurate counts and records.  They may, however, slow the process down.


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