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What Is Cycle Counting In Inventory Management?

Definition of Cycle Count

Cycle Counting describes a physical inventory count of assets in your warehouse or on the sales floor. This is a manual process and can be done in-house or outsourced. Essentially, this method requires someone to physically walk around your business to verify the number of products that are in stock. They are conducted on a regular schedule, usually monthly or quarterly.

Why Do You Need a Cycle Count of Your Inventory?

The purpose of cycle counting is to reconcile your inventory records with your physical inventory to ensure that they match. If they don’t match, there’s an issue with your inventory management system: either it’s not recording the right information or it’s not recording all the information.

What’s The Process of a Cycle Count?

  1. Review the records of your last inventory count
  2. Print/ Upload that report and give it to your employees
  3. Let the employees do the cycle counting
  4. After they’re finished, enter the data into the inventory system & uncover any discrepancies
  5. Depending on the data, alter procedures & adjust the records
  6. Accounting calculates IRA (Inventory Record Accuracy)
  7. Repeat 😊
cycle counting process

Benefits of Cycle Counting

The main reason businesses conduct cycle counts is to ensure that their products are available in sufficient quantities at all times. If a product isn’t available, customers will be unhappy and may choose to shop elsewhere.

Additionally, one of the biggest advantages of a cycle count is that you have full control over the process. It might also prevent theft by employees who may be stealing merchandise from the storeroom and selling it somewhere else (by using false receipts or fraudulent paperwork) or by customers who steal merchandise while shopping at your store.

Disadvantages of Cycle Counting

Since someone needs to cycle count by hand, they can be very labor intensive, and error-prone. It’s also more time consuming than other methods because you have to take multiple counts over the course of several days or weeks before you can get an accurate reading on how much product remains in stock at any given time. Hence, it only provides an approximate picture of your inventory levels.

Tips for a Succesful Cycle Count

  • Use barcode scanners
  • Select employees for the count that are very attentive & meticulous
  • Don’t wait long to address discrepancies during the cycle counting
  • Stop operations when you perform a count of your complete inventory
  • Use inventory software to aid you in the process
  • Secure the stock are on the day of the cycle count to avoid misunderstandings

Other Methods of Taking Inventory

  • Periodic Inventory System
  • Perpetual Inventory System
  • Blind Count

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