AML Blog - The Scan

What is Cycle Counting?

And why you should implement the practice.

Inventory is a vital piece of your business, but the actual process of keeping track of inventory can be intimidating and downright scary. Most small- to-medium-sized businesses take a full physical inventory once a year. The truth is that so much can go wrong in between inventory counts that goes unrealized until the full physical count. Inventory shrinkage can and will happen more than you think – damaged products, employee theft, and manual entry errors for example. How can you combat these issues without shutting down production on a continual basis? Cycle count.

What processes actually constitute cycle counting?

Cycle counting is the process of counting a small amount of your inventory each day or week.

By doing so, you can cycle through the entire inventory on an ongoing basis. It is a continual process of counting and verifying inventory information against your system counts. Say you have 1000 SKU’s that need to be counted. Rather than counting all 1000 at once, count 100 SKU’s every week over the course of 10 weeks or come up with your own cycle schedule. Cycle counting items more frequently cuts down the time between physical inventory counts and gives businesses better opportunities to address any discrepancies that may pop up. If inventory needs to be written off, it can be done at a lower cost spread out over the year rather than a large expense once a year.

If you choose to implement cycle counting, come up with a schedule and stick with it. Choose what time each day, or which day of the week you will count and make it a habit. The full benefits of cycle counting won’t be realized unless you keep up with it. Before counting for the day, make sure that all receipts and orders have been updated when you start your counting. As with many manual processes, the risk of human error does exist. To greatly reduce this component, consider using barcode handheld computers to perform inventory counts. By scanning rather than manually recording part numbers or serial numbers, the risk of human error substantially decreases.

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