“Cycle counting is most effective when it triggers research, identification and elimination of the cause of errors.” That’s the counsel given by Andrew Stein, CPIM, in an article entitled “Warehouse Measurement and Control” in the current issue of APICS Magazine. Today we’ll take a look at some of the common strategies — and mistakes – companies make when performing cycle counts.
Cycle counting is an inventory audit procedure that involves counting a specific section of a company’s inventory at a specific time. It is often a proxy for a full physical inventory count, and involves verifying by count a specific category (e.g., fast moving items) of inventory. It is less imposing than a full inventory, and is usually done in facilities where inventory accuracy is already known to be good.
Stein starts from the premise that you must take a holistic view of the business, not simply a bin-level view. Too often, cycle counts are seen only as cost drivers, and people apply a get-it-done-quickly mentality, instead of using these counts as ways to discover true business process failure.
He cites as an example reducing stock-outs, where poor inventory accuracy can have a damaging effect on customer satisfaction and retention, more so than is often recognized.
To identify areas and tactics that can help correct inventory inaccuracy, Stein first suggests recognizing cycle counts as a measurement tool. He considers the example of a part stored in more than one bin, but the cycle count program only picks up the first bin, rendering any adjustment on that part incomplete, which can cause a whiplash effect when the item is written off from the first bin, only to be found in another next month.
Next, take a holistic view: Is every bin for a certain part number short of material? Maybe you have a theft, package quantity, or receiving issue. The point is, it’s important to drill down deeply enough to get to root causes. That’s where the full picture comes into view, and replenishment decisions become more accurate.
When deeper causes are revealed, so too are communication issues in processes which might be eliminated with training. Perhaps documentation is inadequate. Does a process need to be standardized?
During this process, engage your warehouse associates in your discovery. Make them partners in the process, suggests Stein. Use their knowledge and their insights.
Finally, keep in mind that the goal here is to keep your focus on “achieving a well-designed cycle count program and establishing control mechanisms.” Consider adding ABC (Activity Based Counting) to your cycle counts, wherein fast moving material is counted when a certain threshold is reached, as well as physically validating that a bin is really empty when your system indicates zero on hand. While these sound simple and obvious, they’re often overlooked, and with them sometimes, the underlying causes and process issues that can lead to far greater problems.
You can read Stein’s full article in the May/June 2014 issue of APICS Magazine, which is free to all APICS members – a status we recommend to all our clients.