The cycle counting process is one of the most tedious warehouse tasks, but is an important process to control for the prevention of potential sale losses. These losses stem from out-of-stock situations, which are brought on by inaccuracies in the inventory. To catch these inaccuracies, it is important to do the cycle counting accurately and efficiently.
So, in this article, we are sharing five warehouse cycle counting best practices. These tips could help you accomplish the process more efficiently and, in effect, could stop potential losses. But before discussing the tips, what is cycle counting?
Cycle Counting Objective
Cycle counting is an alternative stock counting method that is performed by counting a small portion of the warehouse’s inventory every week or day. Its main purpose is to solve for the warehouse’s inventory accuracy in order to prevent potential losses.
Inventory accuracy is a measure of how closely official inventory records match the physical inventory. Keeping accuracy as high as possible can prevent the warehouse from:
- Accepting orders that exist on inventory records but are missing or misplaced from physical inventory.
- Denying an order because inventory records show no/insufficient products that are actually present in physical inventory.
Optimizing the Cycle Counting Process
a) Setting Different Count Frequencies
Inventory inside a warehouse can be classified according to value (monetary) or movement (how fast each product goes in and out of the warehouse). And due to the nature of cycle counting, we can set higher count frequencies on high-value or fast-moving items. The reason is that high value items are prone to shrinkage, while fast-moving goods are likely to get mis-picked.
To classify inventory, ABC analysis will be used. Here is a sample table that can help you segment according to value or movement and how frequently each category will be counted:
b) Count Tolerance According to Classification
Cycle counting performance is measured by inventory accuracy (formula below). But it is unrealistic to expect that physical count and records will exactly match for every item.
Instead, an inventory record is considered accurate if it matches the physical count within a reasonable tolerance. But like what we learned in the previous tip, some items have higher classification, which demands a lower tolerance.
Here is a sample table that shows the typical tolerance per classification.
c) Barcode Scanners and RFID
Cycle counting can also benefit from the implementation of warehouse technologies such as barcode scanners and RFIDs.
Barcode scanners can lessen the chance for human error when counting inventory compared to using pen and paper. Writing manually into paper is slow, inefficient, and can result in misreads during the data input process. Scanning barcodes instead is faster and more accurate for capturing quantity and location data for each inventory.
Another technology that can make your warehouse cycle counting process even faster and efficient is RFID. RFID is a small wireless communication tag that contains small amounts of data readable by RFID readers. By equipping inventory with RFID tags, cycle counts can be done in minutes or seconds simply by waving an RFID reader near it, even without line of sight.
Because both technologies use a WMS, location data can be confirmed as well. Correct location is one of the requirements for measuring inventory accuracy.
Drones are a new addition to digitalizing the warehouse and the cycle counting process. They will be equipped with RFID readers, computer vision (AI) and barcode scanners to perform automated cycle counts at any count frequency.
Moving the cycle counting process to drones can improve efficiency because they can easily reach the highest inventories of the warehouse. This significantly cuts the time to execute the process and can result on a safer operation by reducing the risk involved with lifting people to hard-to-reach areas. This also frees personnel to do other critical tasks in the warehouse.
e) Choosing the Right People for the Job
To ensure it is as unbiased as possible, it is important this operation is conducted by people who have no responsibility for inventory accuracy. If assigning the task to a team, it is best to have a mix of seasoned employees, who are familiar with the policies and locations of different items, and those with fresh eyes. This is because seasoned employees have the tendency to overlook small issues and details.
Having the right amount of stock at the right time will lead to a smoother warehouse operation. This can be achieved by performing an effective and efficient warehouse cycle counting process, which you can further enhance by using warehouse technologies such as drones, RFID, and barcode scanners. Following these best practices can increase your inventory accuracy, which results to lower rates of potential loss.