Browse Definitions :
Definition

cycle counting

Cycle counting is an inventory-control method that lets businesses conduct a regular count of several items in different areas in a warehouse, without constantly adding up the entire inventory. Cycle counting at regular intervals is less disruptive than performing a full physical count of inventory, which often requires the shutdown of manufacturing, shipping or other portions of the business.

Two inferences are made in a cycle count – first, that the accuracy of the items that are chosen to be counted can be used to determine the accuracy of the items in the warehouse overall, and second, that if an error in the cycle count is discovered, it could then be expected to occur for other items in the warehouse.

Cycle counts can be conducted along with a company’s daily operations and can be performed by a small, specially trained team. These counts can improve the accuracy of the perpetual (or continuous) inventory system by helping prevent significant adjustments at year-end and increasing the company’s ability to rely on the system or ordering and production scheduling, leading to more efficient inventory control.

How cycle counts work

Cycle counts require someone to physically count a portion of an inventory at a preset frequency so that each item is counted at least once in an accounting period (usually a year). Fast-moving or more expensive items typically are counted more often than slower moving or less expensive ones, and some items are counted every day.

Methods for using cycle counting include employing control groups, random sampling or ABC analyses.

  1. A control group may be used to test that the method that is employed to count items provides the best results. Typically, this involves counting a small group of items several times in a short period and finding and fixing possible errors in the counting technique.
  2. Random-sample cycle counting involves selecting, at random, the items to be tallied. Two techniques that can be used in random-sample counting are constant-population counting and diminished-population counting. In constant-population counting, the same number of items are added up each time a count is made; some may be counted often and some not counted since the selection is random. In diminished-population counting, a number of items are counted but then excluded from being counted again until all items in the warehouse have been tallied up; so each count involves the selection of items from an ever-decreasing number of eligible items to be counted.
  3. The ABC cycle-counting method is based on the Pareto principle, which states that for many events, 80 percent of the effects come from 20 percent of the causes. The ABC cycle counting method uses this principle to assume that 20 percent of the items in a warehouse correlate to 80 percent of sales; these are the “A” items. Meanwhile, “B” items account for 30 percent of the items and 15 percent of sales, and “C” items represent 50 percent of the items in the warehouse but just 5 percent of sales. Inventory-control software can help companies determine how items should be categorized; those with the highest sales value (an “A” item) should be counted most frequently.  
This was last updated in August 2017

Continue Reading About cycle counting

Join the conversation

1 comment

Send me notifications when other members comment.

Please create a username to comment.

How has a cycle count program improved your inventory management?
Cancel

-ADS BY GOOGLE

File Extensions and File Formats

Powered by:

SearchCompliance

  • compliance audit

    A compliance audit is a comprehensive review of an organization's adherence to regulatory guidelines.

  • regulatory compliance

    Regulatory compliance is an organization's adherence to laws, regulations, guidelines and specifications relevant to its business...

  • Whistleblower Protection Act

    The Whistleblower Protection Act of 1989 is a law that protects federal government employees in the United States from ...

SearchSecurity

  • Malwarebytes software

    Malwarebytes is a cross-platform anti-malware program that detects and removes malware and other rogue software.

  • Transport Layer Security (TLS)

    Transport Layer Security (TLS) is a protocol that provides authentication, privacy, and data integrity between two communicating ...

  • van Eck phreaking

    Van Eck phreaking is a form of electronic eavesdropping that reverse engineers the electromagnetic fields (EM fields) produced by...

SearchHealthIT

SearchDisasterRecovery

  • cloud insurance

    Cloud insurance is any type of financial or data protection obtained by a cloud service provider. 

  • business continuity software

    Business continuity software is an application or suite designed to make business continuity planning/business continuity ...

  • business continuity policy

    Business continuity policy is the set of standards and guidelines an organization enforces to ensure resilience and proper risk ...

SearchStorage

  • solid-state storage

    Solid-state storage (SSS) is a type of computer storage media made from silicon microchips. SSS stores data electronically ...

  • persistent storage

    Persistent storage is any data storage device that retains data after power to that device is shut off. It is also sometimes ...

  • computational storage

    Computational storage is an information technology (IT) architecture in which data is processed at the storage device level to ...

Close