BestPracticesForWarehouses

For warehouses that stock a wide range and/or large number of items, cycle counting is becoming an increasingly popular inventory management technique.

 

As opposed to the more traditional method of physical counts (wherein every item in the warehouse is counted at once in a lengthy process), cycle counting is a more frequent and periodic inventory count that checks a smaller percentage of items on a more regular basis. By checking physical inventory at bin locations to make sure it matches the current reported count, the goal is to maintain better inventory awareness more frequently with less disruption.

 

Of course, a lot of warehouses are still pretty used to doing it the old way, so some guidance on cycle counts might be needed to make sure they go as effectively as possible. If you want to learn some early best practices for cycle counts, or you want to try to make your current counts go a little more smoothly, read on –

 

Know the different types of cycle count. Typically speaking, there’s three approaches used for cycle counting in major warehouses:

  • ABC inventory analysis: The most commonly used method, ABC inventory analysis ranks current SKUs based on highest to lowest annual sales volume and assigns every item a letter. The top 80 percent of items is “A”, the next 15 percent is “B”, and the lowest 5 percent is “C”. Generally speaking, more than half of your SKUs will count as “C” items but each of them needs to be counted with equal importance.
  • Control group: This method focuses on a small group of items that get counted repeatedly across a short period of time. The goal of this repetitive counting is to uncover any errors in the count technique and allow you to correct those errors in the future to ensure more accurate counts across the board.
  • Random sample method: Best for warehouses that carry a large quantity of similar items, the random sample method is just that – a periodic selection of random items that are counted at regular intervals to make sure everything is still there.

 

Conduct as many counts as possible. The underlying goal of cycle counting in general is to perform exactly as many counts as needed to maintain accurate inventory levels without spending a massive amount of time counting the entire physical inventory every single time. This is a bit of a long-term strategy, but during your first year of cycle counts you should try to set a several week long goal of completing every cycle count in your warehouse and then starting all over again once the cycles are completed. An ideal length of time for this is generally 13 weeks depending on the size of the inventory in question, and over time you’ll figure out whether you need more or fewer cycle counts to keep your inventory accurate.

 

Budget and prepare for growth. Part of the advantages of cycle counts include knowing you can budget for changes down the line – and see them coming better – thanks to the more frequent nature of cycle counting. This can include hiring more workers for inventory counts, purchasing more warehouse storage or wire shelving for incoming products, or knowing how to switch up counting techniques when needed.

 

Be prepared to react quickly to errors. Above almost everything else, the point of cycle counting is to learn about inventory issues more quickly than usual. However, that information isn’t going to do any good if your warehouse isn’t agile enough to respond to it. Make sure to get a plan in place to respond quickly to inventory errors and get everything back up to the levels they’re supposed to be. Otherwise, why spend the time doing cycle counts?

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