How to Develop a Warehouse Inventory Cycle Counting Process | Solutions PL

What Is Cycle Counting?

Cycle counting is an inventory control method that lets businesses conduct regular checks and balances to confirm whether the physical inventory counts match the inventory records.

This Cycle Count Process is an efficient and cost-effective way to ensure the accuracy of your inventory counts and valuation. Usually, the staff members perform the cycle counts as per the predetermined schedule – weekly, monthly, or quarterly.

Various supply chain experts and warehouse managers prepare a specific plan for auditing the inventory. This meticulous planning often leads to minimal transaction error rates and improves the external high stock record accuracy.

So, no matter if your company is following perpetual or periodic inventory practices for tracking the inventory, cycle counting routinely is an integral step for managing inventory counts.


Physical inventory counting vs cycle counting


Physical Inventory Counting

Includes top to bottom counting of all inventory hands with manual efforts. Sometimes, operations May take a halt is a confusing expression, we should say Operations need a proper Cut-off to make sure all the inventory is in its place. This method demands huge hands and effort and chances of error are certainly high. However, this method is not feasible to perform in larger warehouses where physical counting is done more than once per year.




Cycle Counting

Warehouse Cycle Counting works simply by sampling a group of items and taking inventory only from that particular section. And, further, the accuracy of this sample section is used to estimate the accuracy of all areas in the warehouse.

Any error found during these small incremental counts and sampling procedures will accordingly result in an adjustment to inventory accounting records. This warehouse inventory cycle counting method will bring improved accuracy to your warehouse and significantly eliminates problems with maintaining the record of the stock.


Methods for Cycle Counting


1. ABC Item Designation Analysis

ABC Analysis is the best practice for cycle counting. It is a procedure for categorizing spare part line items or inventory into three groups.

“A” items represent items with the highest value and highest turnover rates. It requires the staff’s primary attention.  It will represent 10-15 % of the top of your line items.

“B” items represent items with higher value with limited turnover or lower value with higher turnover. It will represent 20-30% of your line items.

“C” items represent items with the lowest value and lowest turnover rates. It will require the staff’s limited attention and represent the remaining proportion of your line items.

Note: Here attention refers to the active control of the stock levels.


Designation Value Issue frequency
‘A’ Items High High
‘B’ Items High / Low Low/ High
‘C’ Items Low Low

This ABC Item Designation Analysis is significantly beneficial because it emphasizes counting efforts on only those items that have the most successful impact on the business. However, it doesn’t focus on the risk of over-counting the prioritized areas which further results in the inaccuracy of the sample.

Generally, in fewer cases, you can eliminate the risk by reassigning or adjusting the value of certain areas based on defined criteria and observations. That’s how you can refine the inventory counting process over time by emphasizing products that demand the most of your attention.

In WMS (Warehouse Management System), personnel use the company’s inventory or processing software for categorizing items into different groups and then develop an inventory process of ABC analysis.


2. Opportunity-based:

The opportunity-based cycle counting method is oriented around transactions. It conducts inventory checks at the key points in the cycle counting process –

  • When an item is reordered
  • When an item is stowed
  • When the item’s balance depletes below a predetermined threshold

The staff counts only the areas where the chances of errors are high owing to change. This method primarily focuses efforts mostly on what is necessary. So, the success of this method ultimately depends upon how carefully a warehouse sets its decision parameters.


3. Location-based

The location-based method emphasizes ensuring that every location within the warehouse is touched on a regular interval. It counts inventory in a different part of the warehouse one at a time by assigning unique counters to every section.

Based on that, it traces the inventory and updates the warehouse maps accordingly with the latest information. This technique often helps you in concentrating on managing critical items or areas.

Most importantly, this method does not account for the value of items. Here sampling is done through inventory management software. The items will be counted based on their physical locations only considering the repeated goal too. And since you take the location of the product into account, you can minimize the chances of error to a greater extent.


4. Process-based

In the process-based method, managers are allowed to select areas for counting inventory. This may seem ineffective at first, but it works well. Because staff members are already aware of the trouble spots and thus, you can resolve the accuracy of targeted items and generate positive results.

Mobile inventory software can uncover additional inaccuracies in real time, letting managers use analytics for targeting high-value areas.


How to Automate the Process

Let’s discuss how to develop & automate one in your warehouse operations –

1. Using a 3PL Dynamics :

The 3PL Storage Warehouse Management Software manages all aspects of your warehousing operations. All the necessary elements of a public warehouse are covered by this warehouse management software, including goods in, goods out, customs, storage, cross-docking, Value Added Logistics, RF scanning, order picking, and invoicing.


2. Product Scanners

Automate your inventory scanning process with Product scanners!

Ensure each item is tagged with a barcode so you can scan and accordingly store the information. This data will be further loaded into the ERP or inventory management system to perform cycle counts automatically.

You can also leverage RFID tags for scanning multiple products just with a single scan.


3. Voice-Directed Systems

Conduct cycle counts, item picking, and various other warehouse processes with voice-directed systems! This system will automatically direct employees through a specific workflow to perform different tasks of warehouse cycle counting.


The Final Words

Warehouse Inventory Cycle Counting Process is contributing crucially to improving the accuracy of stock information by unlocking the power of automation.

If you want to integrate Cycle Counting in Warehousing and provide invaluable insights to helping your business reach maximum efficiency, call Solution PL now!