subject: The Cycle Of Counting [print this page] There is, in the field of logistics, no more fundamental concept that is so often misunderstood as the concept of cycle counting. The confusion often comes because of the perspective from which the counting is viewed. To the accounts team, cycle counting means that the system has the correct value of inventory held, to the warehouse staff, cycle counting means counting when the RF gun (or supervisor) tells me to, to the supervisor it means a way of finding lost stock.
So who is right? The confusion above comes about because each party describes what they get from, or give to the counting, and none actually describe the actual practice of counting let alone the process. To understand the process first let us step back to see what is being counted. Cycle Counting is a process that involves the counting of inventory in a storage area. A storage area may mean warehouse, production floor, retail store, farm shed or any other environment where inventory may be stored. Materials can be received, put-away and removed from a storage area, these represent the main forms of inventory movements. The names that we use for each of these movements can vary depending upon the type of storage area and even the reason for the movement. For example in a warehouse we would refer to a receipt, whereas in a production area it may be called a transfer. Items may be removed from a storage area for, order picking or transfer order (warehouse), consumption (manufacturing), sales order or sales (warehouse or retail), or they may be stolen (any type of location). The fundamental point is that only three actions may happen to inventory in any location; it can be received, stored and removed. When we update the computer system (ERP, WMS or whatever you call it) we are making sure that the computer has a record of what happened to the inventory. If we match every physical movement with a correct system transaction the computer will always show the right amount of stock in the right location. 100% inventory accuracy. Cycle Counting is built on this premise. It is in fact an audit to check to see if the transactions are being entered into the system to match what is happening in the storage area. If there is a discrepancy then a process has failed and this is where cycle of counting helps. When the error occurs, a flag is raised. Investigation takes place of all movements between when the location was last counted for that product and when the error was found. The logic flows that, if the inventory was correct last Tuesday but was incorrect on Friday that the mistake happened somewhere between Tuesday and Friday. Once the error is found, a corrective action is implemented to ensure that it doesnt happen again. The cycle of the counting is actually the process of counting locations as regularly as necessary to make sure that the investigation of root cause is relatively short. (Refer to article entitled The Cycle Counting Program.) Where the root cause and corrective action quickly follow the error the chance of reoccurrence is reduced. So while cycle counting does in fact make sure that the system has the right inventory on hand (for our accountants and planners), and may be prompted by the computer system (for our warehouse operator), it is much more a process of continuous improvement than it is an action of counting. The counting triggers the investigation cycle. If you would like a copy of my free e-book Operations Control. A guide to delivering improved Planning and Inventory control. email me at info@operationscontrol.com with the subject Operations Control e-book
