Cyclic counting, for most small and medium-sized companies, is an excellent option to traditional annual physical inventory. This is a counting technique based on periodically counting reference groups instead of carrying out a single annual inventory. It offers a more accurate and consistent idea of the total inventory while reducing interruptions and administrative inventory costs.
There are many ways in which we may carry out cyclic counting in our warehouses and all of them share the same basic features, starting with its cyclic nature. These are the three most used:
Of course, cyclic counting implies including products in a cycle in which we will count them periodically. However, and contrary to an annual stock-taking that demands all operations to stop so we can count each product at a time, cyclic counting divides the inventory in manageable parts we can carry out every day, week, and month. When we finish a cycle, we immediately begin a new one.
An important and common issue companies have with annual inventories comes from the huge gap in the year-over-year data, which frequently results in unexpected losses and discrepancies, especially for high-value products because nobody checks them between counting.
Nevertheless, cyclic counting allows us to separate products in groups, according to value and relevance for the company. Turnover rate, size, and reference type are some of the many criteria we can use to set up the reference groups to count. Thus, for example, we may count those with higher value more frequently. In this manner, we can greatly limit the chance for discrepancies and stop them from accumulating over time to the point where we lose all control over them.
It is clear that annual physical inventories become increasingly difficult to manage as the business expands and pausing operations to carry out the counting is not profitable; therefore, many companies hire additional help just for this scenario. But, if we were to break it down in smaller, more manageable cycles, companies can expand at their own pace and not fall in disarray when it is time to take inventory.
To carry out an annual physical inventory, most companies involve their complete staff, putting other tasks in the background. In addition, not every employee will have the necessary skills or patience for counting accurately, which will result in confusion and doing things twice or more times.
Meanwhile, when we embrace cyclic counting, we can use a team that has been trained in the art of counting that performs its duty and delivers consistent results every day of the week.
Compared to these alternatives, cyclic counting also offers advantages such as lowering the risk of breaking, guaranteeing increased knowledge of the stored references, expediting the detection and removal of faulty or damaged items, and facilitating the detection of mistakes and discrepancies between the ERP system and the WMS system.
In short, even when it seems like we are adding extra work, in reality we are simplifying it.