NetSuite Best Practices: Inventory Cycle Count for Accurate Inventory

If you ask 10 different companies to define cycle counting, you will probably receive at least 15 definitions. In addition, many professional organizations have their own definitions for cycle counting. The good (or bad) news is that all of these definitions could be applicable to your business. What’s important, then, is determining which one(s) is best for you.

 

 

Cycle Counting

At its core, cycle counting is “A systematic process to count inventory.”

But there are many ways to perform a cycle count. Let’s look at a few of the most common methods used by medium-sized businesses.

Cycle Counting Methods

There are two primary business reasons to initiate a cycle count program.

  1. To replace the annual physical count.
  2. To count specific items on a more regular basis. 

Many companies will start with counting specific items and then migrate into a complete cycle count process.

To replace an annual physical inventory count with a cycle count program, the general rule is that all bins (or items if there are no bins) must be counted at least once a year. This can be accomplished in a number of ways, based on the characteristics of the items you stock:

  • ABC – You can classify high velocity, high value or items that tend to have inventory accuracy issues as “A” items, and then these are counted four times a year.  The next group are classified as “B” items and counted twice a year, and the remainder are classified as “C” items and counted only once a year.  These counts should be spread thought the year with each count being small enough to be processed in the same day.
  • Bin Sequence – If your items do not fit the profile above, you can divide the warehouse into similar sections and count a section a day.  It is best to randomly select sections each day to avoid creating any predictability. RF-SMART provides the ability to select one or more bins.
  • Random – You can also create a random selection and assign a date to each item. This method allows you to count all bins for the item in the same count.

Cycle Counting Tips

A full cycle count process can be implemented with or without bins. Implementing cycle counting without bins can be difficult if the item is stocked in more than one physical location and might create more inventory accuracies than correcting.  If each item only has one physical location, than you can implement a cycle count program using most of the same criteria as when using bins.

Cycle counting can be used to validate inventory when items are being discontinued or for other business processes.  With RF-SMART’s Cycle Counting, you can create a count for an item or use one or more filters that include class, department, manufacturer or vendor.

One of the failures of many companies is that they do not have a clean cutoff for transactions or do not take action on the counts that have been performed.  An inventory management solution like RF-SMART provides the ability to perform real-time counting even when other employees are picking, perform line item approval, and create new counts from existing counts.

No matter which cycle count method you use, performing cycle counts instead of an annual physical count will result in higher inventory accuracy and also will identify issues quicker. 

 
This is the second in a four-part guest blog series on NetSuite Best Practices. Our featured guest, George Gulliford, is the Director of Product Management at RF-SMART. With over 30 years of warehouse and logistics experience, George has assisted hundreds of companies in a variety of industries across the globe improve their operations. 
 
Read part one to learn The Secret to Inventory Management, part three to learn To Bin or Not to Bin, and part four to learn Strategies for Retail.