How to use cycle counting for effective inventory control

Cycle counting inventory

Physical inventory counting is an almost universally despised chore among warehouse workers and managers. This task is usually done once near the end of the fiscal year in a single nightmare-inducing night or weekend endeavor. Not only is this large inventory count a discouraging and overwhelming task, but it brings with it a ton of room for error. This is why cycle counting is quickly becoming the new standard in inventory counting.


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, count the stock level per SKU, replace them, and report the results to the warehouse manager.

Since it’s a rare occurrence, the team members involved are 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.

It’s not just the employees that suffer from a process of this nature. The inventory count that took hours of sweat and headache to collect most likely isn’t that accurate. A count performed once a year will include discrepancies that accumulated throughout the year. Worst yet, the count itself took so long that there isn’t adequate time to investigate these discrepancies — more often than not, adjustments to inventory are made without any diagnosis at all.

A simpler and more effective method

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.

Cycle counting is quickly becoming the new standard in physical inventory counting. A cycle count is a counting task that has been broken down to smaller, more digestible fractions of your total inventory. By counting one portion of your warehouse per counting session, you’re able to “cycle” through your warehouse more often and with less down time (or none at all).

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.

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.

SKULabs users already have access to our cycle counting tools. Learn more about how to cycle count with SKULabs by visiting our help center: