By Dattatreya R.Kulkarni Posted February 4, 2016 In Inventory Management in SAP
Owners of Small businesses are caught up in so many transactions and follow up (with customers, with staff, with banks etc.) that they do not get enough time to implement some of well-accepted known and proven management techniques that can have a direct impact on their profitability. One example that falls in this category is management of inventory. One of the techniques that can be used to ensure that your inventory remains under a ‘watch’ round the year is called “Cycle Counting”.
What is a cycle counting?
It is an inventory auditing process that occurs continuously throughout the year, allowing you to only focusing on a subset of inventory. Cycle counts are less disruptive to daily operations, provide an ongoing measure of inventory accuracy and procedure execution, and can be tailored to focus on items with higher value, higher movement volume, or that are critical to business processes.
Here are the largest benefits to implementing cycle counts in your business:
1. Minimum down time of warehouse
In a conventional ‘physical stock take’ process, the warehouse operations are completely closed at least for one full day, thus creating a disruption. As against this, in cycle counting accuracy of the inventory is checked on an ongoing basis. Further, the number of items covered under cycle counting (decided based on business rules) are much less than the total items stored in the warehouse. Due to these reasons disruption to warehouse operations is brought down to a minimal level while at the same time improving accuracy of inventory.
2. Increase confidence in buying decisions.
While implementing cycle counting the company is required to continuously assess inventory. By having smaller check-ins, focusing on a subset of inventory, buying decisions are more informed and targeted. One can avoid stock-outs ahead of time and create a better report for buyers. This also leads to an improved communication between departments/functions.
3. Increased Accuracy
As the inventory gets counted frequently, mistakes are corrected rather quickly (in the next cycle count run). Due to this the accuracy of inventory numbers is maintained at a high level consistently. If the same was done only a year, waiting several months to correct an error may cause a large issue for the business.
4. Increased Diligence towards inventory
Inventory can often be the most frustrating part of owning a product-based business. Implementing smaller cycle counts allows your entire operations team to see your stock accuracy as a vital part of your business, allowing them to feel more confident about the business decisions you’re making. It will also decrease the amount of stress it causes, allowing for it to be accomplished with minimal haste.
5. Cost and Time Savings
Because cycle counts are electronic and ongoing, business operations are no longer disrupted by full physical inventory counts that halt business operations. In addition, problems and discrepancies are more easily spotted and corrected. This saves you labour costs and hours of time.