You’ve been hearing a lot about cycle counting, and you’re considering making the transition. But what is it about cycle counting that really makes a difference? How does cycle counting work and why does it send shockwaves through your organization that can boost your profits?
The number-one reason that cycle counting works for warehouses of all kinds is its ability to generate awareness of inventory issues. Annual physical inventories leave a huge gap in information during the normal operating months, and often provide a skewed set of data at inventory time. With a cycle count program in place, you will be receiving daily updates on inventory that can be analyzed in light of the day’s sales, shipments and receipts. Suddenly you will have visibility into your inventory at all times and will be able to pick out small errors that can compound into major discrepancies.
Annual physical inventories are disruptive. The problem that many companies face with annual inventory counts is that they spend weeks preparing for the big event. In effect, an annual physical inventory is a picture of your warehouse after it has been on its best behavior, but it isn’t necessarily representative of your warehouse under normal operating conditions. This is an important distinction to make. When you move to a cycle counting program, your warehouse will always be under the scope of an inventory counting process, and you will see a shift in the condition of your warehouse. This improves the accuracy and consistency of your count and doesn’t leave room for any hidden surprises.
Boosting Internal Capabilities
Many companies turn to third party service providers to handle their annual physical inventories. This may be because they simply don’t have the staffing to perform them but it can also be because they hope that the third party has specially trained counters who are most likely to give them an accurate count. For those who choose to use their own team to conduct inventories, there are often accuracy and efficiency problems caused by staff members who are not adequately trained in how to conduct thorough inventory counts. By switching to cycle counting, you will begin training a highly skilled team of counters within your organization. This means they are available to conduct recounts, investigate errors, and provide insight into the problems they are seeing on the floor.
These are three essential elements that make cycle counting work. You can see that approaching inventory counts from this perspective provides you with better information year-round than any other inventory system.