The Art of Inventory: How Cycle Counting Keeps You Balanced

Inventory management is a cornerstone of successful businesses, particularly those in eCommerce, retail, manufacturing, and logistics. While traditional full inventory counts (typically done annually) play their role, the growing trend and best practice in the industry today is cycle counting.

Physical inventory counting is more than often viewed with dread and anxiety by both warehouse employees and managers. Typically conducted once at the close of the fiscal year, this mammoth task often transforms into a daunting night or weekend project. Beyond its overwhelming nature, this comprehensive inventory count can be riddled with potential errors. Consequently, this is why cycle counting is quickly becoming the new standard in inventory management.

Problems With Traditional Counting Methods:

“Inventory Day” is a hated phrase in the warehouse management industry. The event is often forced by accounting departments and performed after closing time or on a Saturday. A handful of workers are tasked with pulling every piece of inventory off the shelf, counting the stock level per SKU, replacing them, and finally reporting the results to the warehouse manager.

Since it’s a rare occurrence, the team members involved are often uncomfortable and unsure of exactly what to do. They make mistakes and everyone involved gets frustrated. This issue is exacerbated by the likelihood of this chore being done on everyone’s day off.

The implications of this process extend beyond just the workforce. An inventory count that demands hours of arduous effort, often results in questionable accuracy. An annual count captures errors that have piled up over months. Even more troubling, the extensive duration of the count leaves little room to delve into any inconsistencies. As a result, inventory adjustments frequently occur without a thorough understanding of the root causes.

While single physical inventory counts are the most common way to account for shrinkage and other discrepancies, there are other avenues worth exploring. If the count is taking too much time or isn’t giving you the results you want, you may want to consider a leaner method of maintaining an accurate inventory count.

What is Cycle Counting?

Cycle counting involves auditing a small subset of inventory items in the warehouse at specific intervals, maintaining accurate inventory levels. Rather than halting operations to count all items, companies adopt regular cycle counts. This approach promotes consistent accuracy while allowing day-to-day operations to proceed unhindered.

Why is Cycle Counting Inventory a Good Practice?

There are a number of benefits to switching to a cycle counting workflow. Counting more often reduces the chance of discrepancies, and gives you more time to investigate the ones that do come up. Being able to diagnose why your stock counts were off is huge, as identifying the problems (shrinkage, inadequate training, warehouse placement, etc.) may help prevent them from reoccurring.

Not only is cycle counting better for your inventory and accounting records, but it can be better for your team. By making inventory counting part of your regular warehouse operations, your team will become more skilled and comfortable with the task. After cycle counting has been integrated into their workflow, team members will be able to get the chore done faster and with less headache. Not only that, a more accurate inventory count increases confidence when selling to customers, publishing new listings, and reordering from suppliers.

Key Benefits of using the Cycle Count Method:

Increased Inventory Accuracy: Regularly verifying stock levels increases the accuracy of inventory records. This reduces the chances of stock-outs or overstock situations.

Operational Continuity: Since only a portion of the inventory is counted at a time, business operations can continue uninterrupted.

Cost-Effective: Reduces the cost and time associated with complete stock counts. Businesses don’t have to halt their operations, and they can better allocate manpower.

Identifies Issues Promptly: Regular cycle counting can swiftly identify and rectify sources of discrepancy like theft, damage, or misplacement, helping businesses address problems before they escalate.

Enhances Customer Satisfaction: Accurate inventory ensures that businesses can meet customer demand efficiently, thereby improving service levels and trust.

How to implement effective cycle counting:

Cycle counting is an inherently simple process that’s easy to pick up and integrate into your workflow. However, it’s not without its potential kinks, and there are opportunities to optimize your picking:

  1. Count early and often. A large benefit of cycle counting is that you are counting a small amount of inventory more frequently. Break up your inventory into groups by location, set a schedule to count one group per week (or every other week, or whatever suits your needs), and stick to that schedule.
  2. Count top-selling SKUs more often. The Pareto principle, more commonly known as the 80-20 rule, states that 80% of your sales usually come from 20% of your catalog. Use this to your advantage when cycle counting by grouping those 20% of your SKUs together and counting them more frequently. Your “money SKUs” are the ones whose inventory is changing the most often, and they’re the ones that need the most accurate stock counts.
  3. Show counters the current stock level. Sending your team members in blind isn’t as helpful as it sounds. When they’re counting stock, having an indicator of what you believe to be the current stock level helps as a reference in case they overlook a large portion of that inventory.
  4. Use barcode scanning to make counting easier. Visually counting and writing down inventory counts is slow and error-prone. A barcode scanner and an electronic counter is faster, more accurate, and easier for your team.
  5. Investigate and address discrepancies. Now that you’re finishing your counting tasks faster than ever, you have sufficient time left over to diagnose why stock counts are differing from what was previously recorded. Look into sales records, receiving history, and reorder reports to see what caused the recorded stock level to become inaccurate.

How SKULabs Makes Cycle Counting Easier:

User-friendly Interface:

SKULabs offers an intuitive interface, making it simple for users to initiate, track, and complete cycle counts.

Inventory Segmentation:

With SKULabs, businesses can segment their inventory based on various criteria, such as sales volume, product type, or location. This makes it easy to prioritize which items to count and when.

Real-time Syncing:

Any changes made during the cycle count are instantly reflected in the system, ensuring that sales, purchase orders, and other operations align with the most recent stock levels.

Barcode Scanning:

SKULabs supports barcode scanning, which accelerates the counting process and significantly reduces human errors. Scan the product, enter the count, and you’re done!

Discrepancy Identification:

Once the cycle count is entered, SKULabs compares it to the expected count. If discrepancies are noted, they’re highlighted for investigation, ensuring that issues are addressed promptly.

Exportable Reporting:

After each cycle count, a report can be generated that businesses can use for analysis. This aids in understanding stock movements, identifying trends, and making informed inventory-related decisions.

Seamless Integration:

SKULabs seamlessly integrates with popular eCommerce platforms and marketplaces. This ensures that inventory levels are consistently accurate across all sales channels.

Role-based Permissions:

Businesses can assign specific roles to team members, ensuring that only authorized personnel can make changes to inventory levels, enhancing security and accountability.

Cycle counting is undeniably the most robust method to maintain inventory accuracy, and platforms like SKULabs further simplify the process. With an array of features tailored to optimize cycle counting, SKULabs is an invaluable tool for businesses seeking to uphold the highest standards in inventory management. By leveraging such platforms, companies not only ensure accurate stock levels but also facilitate smoother operations, improved customer satisfaction, and overall business growth.

Now is the perfect time to discuss how we can help take control of your inventory with SKULabs’ dedicated Cycle Count Interface!

Chat with one of our experts today.Schedule a meeting or give us a call at 1800-243-2986 to learn more.