Cycle count

From Free net encyclopedia

A cycle count is an inventory management procedure where a small subset of inventory is counted on any given day. Cycle counts contrast with traditional physical inventory in that physical inventory stops operation at a facility and all items are counted, audited, and recounted at one time. Cycle counts have the advantage that they are less disruptive to daily operations, provide an ongoing measure of inventory accuracy and procedure execution, and can be tailored to focus on items with higher value or higher movement.

Cycle Counting by Frequency

According to the Pareto principle, if 20% of inventory items represent 80% of inventory value, the expensive items should be counted most frequently. While this traditional approach may appeal to accountants by minimizing the variance in inventory value, it can be very inefficient from a supply chain management perspective. Inventory shortages of even a small, inexpensive component can bring the entire assembly line to a halt while the component is re-ordered.

A new approach called cycle counting by frequency states that items more frequently accessed should be counted more often, irrespective of value. Every time an employee adds or removes an item, there is a risk of introducing inventory variance. Logical inventory zones can be set up to distinguish items depending on how frequently they are touched. [1]

Automation

To conduct efficient and accurate cycle counts, many organizations use some form of software to implement an inventory control system. These systems may include mobile computers with integrated barcode scanners that allow the operator to automatically identify items, and enter inventory counts via keypad. The software then transmits data to a database on a host system which can generate inventory reports.