6 Best Practices for Warehouse Inventory Cycle Counts

Warehouse

Top Tips for Warehouse Inventory Cycle Counts

 

Inventory cycle counting differs from the traditional physical counting method, where total operations had to cease for a complete count to be carried out. The modern cycle counting approach is continuous, less disruptive and can be tailored to perform more regular counts on higher value and higher risk items in your warehouse.

 

Warehouse management can draw two conclusions from performing inventory cycle counting. First, the accuracy of the items in the specified cycle count is a gauge of your entire warehouse’s inventory accuracy, and if there’s an error in the cycle count, it can indicate that further errors are probable in the remaining warehouse inventory.

Many companies adopt the use of automation to ensure greater efficiency and accuracy when carrying out inventory cycle counting. Inventory control systems can be easily integrated in to warehouse management systems. Such automation can include portable mobile computers integrated with barcode scanners, where floor staff can identify goods and submit the inventory counts automatically. The figures obtained are then transmitted to a database host system to produce an inventory report. The operator can set the criteria and the system chooses specified inventory to be counted at a certain time.

 

Here are some of the best practices for carrying out warehouse inventory cycle counts:

 

1) Warehouse management system

To perform inventory cycle counting, it’s necessary to have precise data on all items coming in and going out of your warehouse. A warehouse management system is the most accurate way to monitor the movement of inventory within the warehouse as well as goods received and shipped.  This real-time inventory tracking is simply not possible to do manually using an excel spreadsheet or paper. Not only do warehouse management systems easily integrate with the cycle counting process, they also have a positive impact on overall warehouse operations. Users will be able to distinguish the count frequency and organise a counting schedule around it.

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2) Generating an optimised cycle count

A cycle count schedule should be based on the risk and value of each item in the warehouse. Some goods will be of high value and have a higher turnover rate than some other items, posing the greatest misplacement risk. As such these high value and high risk items should be prioritized for regular cycle counts over lower risk goods.

Many organisations implement a three-tiered process for inventory cycle counts. The top tier consists of high risk items, while moderate risk items are in the second tier, and low risk items are in the third.

 

3) Compare cycle counts

Cycle counting gives warehouse management a clear perspective of the high value items they need to ensure are always in stock.  Unfortunately, it’s virtually impossible to match physical inventory and the theoretical figures in your warehouse management system due to the inevitability of human error, with items often put away in the wrong place. Inventory cycle counts are necessary to highlight these mistakes by comparing the actual inventory with the systems theoretical balance. When the figures don’t match, double check by re-counting and if there still appears to be an imbalance, take necessary action to identify the error.

 

Blind counts

Blind counts are a great method to avoid the temptation for operators to make changes to their counting results.  During blind counts, the operator is unaware of the theoretical number listed in the system. This way, they can’t simply copy the figure listed to save the time and hassle of carrying out the count themselves. Any differences that may appear are then investigated.

 

 

4) Improve warehouse organisation

To perform efficient cycle counting in a messy warehouse can be a challenging task. Try to organize your warehouse and have each item placed in its dedicated location, visibly labelled and correctly linked to the warehouse management system.

Equipment such as carousels can contribute to a more efficient warehouse and improve cycle counting techniques. This all helps with improving warehouse efficiency .

 

5) Variance tolerance threshold

Another importance aspect of a successful inventory cycle counting procedure involves implementing a tolerance minimum for count discrepancies.  Organizations need to account for variances in both quantity and money value, with the differences of both measured on their absolute value. The tolerance shouldn’t be set too high.

 

When multiple individual variances arise but the total net quantity or money difference is low, there is still an underlying issue triggering the inventory differences. A low net variance could be down to luck on one sample, while a different sample with similar errors but directionally consistent differences could show very different results.

 

An organized tolerance threshold process needs to be in place and the investigation procedure needs be closely followed and well documented in every variance case. It’s important for the organization to distinguish those error thresholds that require a second count by a different person and an investigation of the underlying problem. When a second count is necessary, it’s a good idea to place an experienced individual in charge of carrying it out.

Any unresolved variances after the second count should then be noted in the system. This allows warehouse management to monitor variances over time and highlight any trends that develop. These trending issues might flag locations or particular goods that could benefit from additional counts.

 

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6) Documentation and testing

It’s importance that back – end processes are carried out by employees that are entirely separate from the counting procedures. Ensure all results, including first and second counts, investigation outcomes and follow up processes are documented and updated when necessary. This data ensures management can make essential changes to optimise their inventory cycle counting process.

Warehouse management should also carry out annual tests of their cycle counting program. These tests should be used to check item classifications to determine if each item is counted as regularly as required. Lastly, gather all details and instructions for performing cycle counting into an organised document for employees involved in the inventory cycle counting program.

 

The continual process of cycle counting enables organisations to keep a gauge of their inventory accuracy without the need to disrupt daily warehouse operations. Inventory cycle counts ensure that every item is counted numerous times per year (depending on their risk classification).

The findings from monitoring and documenting the results from each count allow management to make the necessary changes to improve their warehouse inventory cycle.