Many businesses conduct regular physical inventory counts as part of their annual financial accounting practices. Large companies with thousands of items typically shut down for a week or more to perform a complete physical inventory count.
Cycle counting is an inventory management method that enables you to count products or items in a particular warehouse location without interrupting operations to perform a full physical inventory.
Inventory counting is a critical process in warehousing because it provides a clear picture of items on hand, aids in maintaining optimal inventory levels, and allows for data-driven inventory forecasting. When done manually, inventory counting is a time-consuming and error-prone process.
The following are some of the most common issues that customers encounter when automating inventory counting:
- Inventory count procedures and matching of insights gained to inventory records take time.
- Full inventory counting may cause delays in certain manufacturing or warehouse operations.
- Employees are diverted from routine and strategic tasks that cannot be automated.
- Inventory counting is a time-consuming process prone to human error and bias, impacting inventory reports and balance sheets.
Inventory counts can help you improve your inventory management.
You already know how important it is to keep track of your inventory, whether you’re new to the game or a seasoned professional. That doesn’t make the task any less daunting or enjoyable.
In this article, we will discuss how to make stock counting easier by covering the following topics:
- What exactly is an inventory count?
- Why is it significant?
- Inventory Counting Types
- Using technology to count inventory
What is an inventory count?
An inventory count, also known as a stock count, is the process of tracking the inventory items in your warehouse that are available for sale. There are several methods for counting inventory, which best depend on factors such as the size of your business, frequency of counts, automation, and other factors.
Warehouse Management is not just how much space you got but how you use it! Definitely, technologies play a key role in shaping your business and managing your warehouse. What are the top technologies you should adopt to manage your warehouse? Let’s discuss!
Why is it significant?
Inventory counting is essential because it informs you of the amount of inventory on your shelves at any time. However, there are various other reasons why stock counts must be performed regularly.
A few of those include:
- Avoiding stock outs or overstocking: Maintaining a regular inventory count gives you more information for demand forecasting-better planning results in optimized stock levels, which means less revenue lost.
- Recognizing and preventing loss: Knowing what’s on your warehouse shelves allows you to identify when stock has passed its shelf life and when some of your inventory goes missing.
- Improved accuracy: Knowing your stock levels provides greater clarity for your entire supply chain.
Inventory counting is essential because it tells you how much inventory is on your shelves at any time. However, there are numerous other reasons why regular stock counts are necessary.
Types of Inventory Counts
As previously stated, the method you use to count your inventory can be influenced by various factors. Among the most common methods of inventory counting are:
Periodic inventory: Periodic inventory is a method used by businesses just starting with inventory control. It entails counting the entire stock on a weekly or monthly basis. While you will have an accurate count at the end of the day, those figures will not last long.
Inventory cycle counting: Inventory cycle counting is used when periodic counts become too frequent. It entails counting a portion of your inventory each day for a month to count the entire stock. These counts can identify discrepancies and trends in damage, shrinkage, and spoilage.
ABC counting: This method employs cycle counting but incorporates more data. This entails prioritizing your products based on their price and popularity. “A” items are the top 20% of items that sell the fastest and are the most valuable. The bottom 20% of items are “C,” and everything in between is “B”.
“A” items are counted the most frequently, such as daily or weekly, “B” items less regularly, and “C” items the least often. This makes managing your stock counting calendar easier while maintaining a more accurate picture of your inventory levels.
Just-in-time inventory: Just-in-time inventory (also known as JIT inventory) is a method for when a supply chain is in sync. It coordinates receiving raw materials from the supplier as a customer purchases it, reducing waste in the form of inventory housing costs. However, this is risky because a single hiccup in the supply chain can disrupt the entire process.
Best Practices for Inventory Counting through technology
Conventional manual inventory counts are performed on paper by hand. However, this procedure is time-consuming and prone to human error. You can use technology to speed up and improve the accuracy of stock counts.
The following are some examples of inventory counting technology:
- Barcoding/RFID
- Lot control
- Enterprise resource planning (ERP) software
Barcoding/RFID
One method of tracking inventory levels and movements is barcodes, RFID, or QR codes. Although some manual labor is involved in this automated process, inventory management is automated. To begin, determine whether your product already uses a format that you can use, such as UPC codes. Then decide where you want to add barcodes and what type to use.
Lot control
By this method, You can easily locate and track items for details like expiration dates, recalls, country of origin, materials, and more by assigning a lot ID to each item in your inventory. Lot control uses the ID to ensure regulatory compliance by, among other things, shipping items that cannot be combined separately, identifying hazardous materials, and restricting sales to licensed customers.
Enterprise resource planning (ERP) software
As your inventory system improves in stock counting, use ERP software to track your inventory. Automated counting tools are not only available but also the norm. Cycle counting is performed regularly by ERP software; The results are then used to guide the rest of your inventory process. Furthermore, your inventory data is always up to date and available across your organization, ensuring that everyone in the supply chain is on the same page.
In summary
Most of you reading this might already do stock counts regularly. Or perhaps your company is growing, and your current method of stock counting is no longer adequate. Regular, pre-determined inventory counts are critical to business and revenue growth through technology or a different method of calculating stock levels.
