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Why an Inventory Cycle Count Will Increase Your Accuracy

Posted by Robert BrandonLast Updated October 11th, 2023
— 6 minutes reading

We’ve gone over how to perform a cycle count before, but we’ve never really explained what a cycle count is. Today, we’ll be going over what an inventory cycle count is, how they’re performed, and why they’re important for businesses. We’ll also go over some “best practices”, just in case you’re looking to implement cycle counts as well. 

What is inventory cycle counting?

As the name suggests, a cycle count is one of many methods for counting your inventory. It’s similar to a physical count, but there are a few key differences. 

During this process, a business regularly counts the amount of available product within a certain category. For example, one day they might count the number of TVs. The next day, the number of phones– and so on. These counts could be done monthly, weekly, or even daily, and–  over time– account for the whole warehouse. 

A cycle count is done on a select number of items on a regular basis such as daily, weekly, or monthly. A physical count is done on all inventory annually.

This is the biggest difference between an inventory cycle count and a physical count. Cycle counting relies on small-scale, repetitive counts in order to provide an accurate snapshot of inventory levels.

The physical count process involves counting the entire warehouse all at once.

What are the benefits of cycle counting?

The cycle count process has a number of benefits over physical counting. Here are the big ones: 

Less disruptive – The scale of physical counts means that they require more manpower, and a lot more time. This makes them extremely disruptive; to the point that many businesses close down completely to perform physical counts. This, of course, leads to a direct loss in revenue. 

On the other hand, cycle counts are smaller and require far less manpower to perform. This means that businesses can operate normally during cycle counts, leading to a minimal (or nonexistent) loss of revenue. 

Higher accuracy – This might seem counterintuitive. After all, the more you perform an inventory cycle count, the more chances there are for errors to occur, right?

It’s actually the opposite. Businesses that count inventory more often find– and fix– errors more quickly. It also helps that you’re counting a smaller amount of inventory each time, which lowers the chance of any errors. 

Not as time consuming – At least, sort of. In theory, each process should take the same amount of time. After all, you’re counting the same amount of product– or at least, close to it. 

In the short term, though, setting aside a couple of hours to count inventory is far less time consuming than dedicating a day (or two!) to the task. 

Informed purchase decisions – A by-product of higher accuracy. Having more accurate records means that you’re much less likely to purchase inventory that you don’t need. This can free up capital in the short term and prevent waste in the long term.

 9 Benefits of Cycle Counting:
1. Less disruptive
2. Higher accuracy
3. Not as time consuming
4. Informed purchase decisions
5. Audit friendly
6. Increased efficiency
7. Decreases dead stock
8. Real-time information
9. Improved customer service

With all this in mind, however, it’s important to note that cycle counting is not a replacement for physical counts.

Are there different cycle count methods?

Yes– and quite a few at that! We’d be here for hours if we explained each and every one, so it’s best to break them into different categories. 

ABC counting is the most common form of cycle counting. Products are labeled A, B, or C depending on their level of importance. For example, products labeled “A” of high importance, and are constantly monitored. 

Random sampling is exactly what it sounds like. Instead of operating based on a system, products are counted at random until the cycle is complete. 

Opportunity based counting refers to when businesses perform counts at “important times,” such as reorder periods. 

Process control counting lets the counters pick which sections to count. In theory, employees can choose to count only the “easiest” product categories while avoiding the “difficult” ones. In practice, however, employees tend to count items with the highest degree of variance. 

Implementation and best practices

An inventory cycle count may be more efficient than a physical count, but like we said before, they don’t replace physical counts. When implementing them into your workflow, it’s best to perform a physical count beforehand. This way, you know that you’re starting off with an accurate count. 

Best practices tend to differ from industry to industry, but there’s some that every business tends to follow. 

  • Stop inventory movement – Processing orders during the process will lead to inaccuracies. This can lead to issues further later on, and creates more work somewhere down the line. 
  • Keep everything up to date – Whenever you receive new inventory, make sure to register it in your inventory management system. Otherwise you’ll end up with greater discrepancies. 
  • Perform annual physical counts – We’ve said it before, but it’s worth mentioning again. An inventory cycle count does not replace physical counts. It’s still best to do annual counts to create an accurate starting point for the year. 
Limiting physical counts to once per year and using inventory cycle counts periodically will drastically improve your inventory accuracy.
  • Set a schedule and stick to it – Repetition is key. This process should be performed quarterly at bare minimum. 
  • Don’t give up – Even if you end up lacking the resources to perform regular counts, don’t stop doing cycle counts altogether. Instead, learn to prioritize and track higher-value inventory. 
  • Alternate staff – The cycle count process can be tedious. Alternating between teams keeps people from burning out, and could stifle any potential thievery. 
  • Find what works for you – Different businesses need different things. Find your flow (ha!) and stick to it. A system that works for one business might not work for yours, and vice versa. 

How does inFlow help?

This process isn’t fun. There’s no way around that. That doesn’t change the fact that it’s an important part of warehouse management. At the same time, that doesn’t mean there’s no way to make it easier. In this short clip from our podcast, we talk about perpetual vs. periodic inventory systems and how using a perpetual system like inFlow can make your cycle counts easier.

Secret Life of Inventory | Periodic vs. Perpetual Inventory & Cycle Counts

inFlow makes things easier by giving you a starting point. Instead of gathering a list of products and creating your own sheet, inFlow does it for you with just a few clicks. inFlow also has its own internal tracker, letting you know what might have fallen through the cracks. 

inFlow also offers some level of automation. Instead of manually updating multiple sheets, once you complete the count, just click the Complete & Adjust button to update the system quantity. At the end  of the day, though, the inventory cycle count process is based on manual labor, but software like inFlow can make things easier.

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