James Shores goes into detail on what Cycle Counting is and how businesses can do it effectively.
Hi, welcome to this Whiteboard Wednesday. I’m James and today we are gonna be talking about everyone’s least favorite game: the cycle count.
Now you can save yourself some trouble when it comes to counting your warehouse, or your inventory, by checking periodically in different sections throughout the year. But we’re gonna use the example as if we’re counting everything all at once, and going through all of our stock, all of our inventory. A lot of companies are starting to do this as we get towards the end of their year.
What is our objective? Well one, we want to be accurate, both in our process of going through our mazelike warehouse. We also want to be efficient. We’re not hopping around from place to place.
So we obviously need a process of its own in going through all of this, and hopefully we can also establish what are known as the ABCs. So the ABCs are kind of the categories of the products, the inventory, the materials that you use the most. A being the product that will – you rely on most, that should be on hand, ready to be used, whereas B and C not as much, especially C. C is the one that you don’t have to count quite as often. But we don’t need to get into the specifics.
But ideally it would be nice to know exactly what that is so that we have accurate information. We’re always talking about how important accurate information is in making your business choices.
Now as you’re going through and counting and making sure that you’re at accurate levels, part of our results should be – and obviously this is kind of the same thing here – the results should be accurate information. You can’t make good business decisions without proper information, without accurate information.
And the results should also be effective in telling you that yes, you’re on point with how much material you have on hand, that it’s accurate, and ideally that you’ve established your ABCs.
Now if you’re going through a manual process, establishing your ABCs could be a little more difficult because you really have to go through your books, there’s a little more human error possibly involved, whereas if we have more of an automated process through software – through inventory management software – we can know outright what our ABCs are so that we can have enough product in our warehouse to serve our needs at all times – to have reorder points, to make sure that we have enough coming in, coming out, but also that we’re not losing or wasting money on inventory that’s just sitting there taking up space, taking up our cash flow.
So, when it comes to cycle count, remember, we need to be accurate so that we can get the proper info for making decisions. We need to be efficient in going through our inventory and counting so that it can be effective in telling us maybe where we can order less, where we have too much – maybe where we’re not actually keeping accurate count. But ideally we need to establish our ABCs so that we can know what material, what good, is serving us the best way possible without getting tied up and losing our cash flow.
That’s this Whiteboard Wednesday. Thanks for joining us. See you next week.