Cycle Counting Part 1

This is part 1 of a 2 part series.

Who can think about Supply Chain Management without thinking about annual physical inventory?  Additionally, who can think about annual physical inventory without recalling with dread that annual torture?  Going into the bowels of the plant, that dungeon where no light shines, and everything is coated with dust, dirt, grime, and cob webs.  Everyone gets filthy, hands and hair get grimy, and clothes get ruined and end up in a dumpster.  Breaks between breakfast and lunch are eons apart as is the time between lunch and dismissal.

Where you count screws and fasteners until your fingers bleed, batteries crush your hands, and who knows what is always threatening your feet.

Ah yes, the good old days, where the inventory team captain sent you to recount and, then if you’re lucky, adjust the count.

Man, have I got news for you!  The annual physical inventory is dead and gone.  Long live cycle counting!!!

Don’t hurrah to soon because the counts go on, the same rules apply, the inventory freeze continues, but now the spoiled plans and forced weekend work have been replaced by some brand new mathematical concepts and technology.  Ditto the cavernous dank and dreary subterranean warehouse.

Back when Vilfredo Pareto introduced his revolutionary concept of the 80/20 rule, or Pareto principle, or the significant few and the trivial many, yeah verily I say back in 1842, or so, when he advanced his postulates and theorems he laid the ground work for the eventual elimination of the annual physical inventory.  Now, double entry bookkeeping, was invented by Monk Luca Pacioli in Milan in 1494 or was it Benedikt  Kotruljevic in 1416, there are different camps on these details.  However, in any event I still don’t know who invented cycle counting.  If you do and can substantiate it you can win an 8×10 copy of this article suitable for framing.

As is my standard theme the basics are still the same.  Look guys and gals, you can’t get away from the fundamentals because they are the bedrock issues!

• Freeze the activity. Do not allow movement, no in’s or no out’s.  No adjustments PERIOD.
• Allow a move/transaction only by an act of God or as close as you can get (maybe a VP of Materials or Operations or CFO…all 3 is best).
• Identify by SKU/Part Number all items to be counted and ALL ASSOCIATED LOCATIONS.
  • Stock Locations.
  • Receiving.
  • Lay Down Areas.
  • Outbuildings.
  • QA/QA Hold.
  • Test Dept.
  • Anything in shipping should have been decremented from stock through the normal Bill of Materials, Sales order, etc.
• Define and reconfirm all units of issue (lots of errors here in ft., ea., and dz.).
• Identify your counters and tie them to an area or a series of parts (via SKU or P/N).
• Recount if the delta is greater than 10% of the quantity or $500 whichever is lesser.

Well, there you have it.  This has been the basics of cycling counting and its history all in one article.  Remember, this is part 1 of a 2 part series, so stay tuned.

Part 2 will address ABC, Identifying items to be counted, Identifying counts per day, and how to achieve 95% accuracy.

Your path to business success.