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Top 6 Benefits of Cycle Counting vs Annual Inventory Counts

Puneet Bhalla

Associate Director - Marketing @ Shiprocket

January 4, 2017

4 min read

The key aim of almost every manufacturing and distribution company is to eliminate the very need for physical counting and rather depend on the cycle counting to keep the numbers of inventory up to date. Inventory counting tools, inventory management as well as inventory software like the barcode scanners, can help companies achieve this goal.

Although it doesn’t eliminate the need for inventory counting, some devices make it easy for the companies to keep a check on their inventories on a regular basis. When inventory data is updated regularly, you’ll never need to carry out lengthy physical counts.

What is Cycle Counting?

Cycle counting is an ongoing process that involves validation of the accuracy of inventory in a company’s accounting system or the ERP by regularly counting a certain portion of the inventory. The cycle can either be daily or weekly, depending on your preferences. With cycle counting every item of your inventory is counted multiple times in a year.

6 Advantages of Cycle Counting over Annual Inventory Counts

Cycle counting offers several benefits. Let’s take a look at some of the benefits of cycle counting over annual inventory counts:

Reduced Disruption In Operations

Every company that performs cycle counts regularly doesn’t need to shut down to perform the physical counts. It can be too expensive for a company to shut down its processes for a day or two.

Reduced Errors

With cycle counting, time between the counts is reduced, thus providing enough time to fix any errors that might have taken place. If by any chance the inventory is not accounted for correctly, it is easier to catch the error by way of cycle counting. Cycle counting also improves the accuracy of inventory counting, as you’re less likely to make any mistake while counting a relatively smaller amount of inventory.

More Confident Buying Decisions

In the cycle counting method, the inventory counts are done regularly. With this continuous assessment, you are able to focus better on the subset of the inventory. As a result of this, the buying decision you take is much more targeted and informed. Hence, cycle counting avoids stock outs way ahead of time and thus creates a better report for the buyers in your team.

Saves Time and Resources

Annual inventory counts can be a messy process. It may need a lot of time to check the inventory counts. Moreover, if there is any possible discrepancy, finding the error just becomes a lengthy and time-consuming process. To avoid wastage of time and resources, cycle counting can be helpful.

Improved Customer Service

When you have well-maintained records, you know where your products are and how many products you have in stock. So, when the customers make an order, facilitating a quick delivery can be easy. When customers get an early delivery, they’ll naturally be more satisfied.

Sales Increases

Your happy and satisfied customers are much more likely to recommend you to others. So, this can indirectly lead to a rise in sales.

Implementing Your Cycle Counting Program

Hopefully, the above-listed advantages and benefits of the cycle counting program have convinced you enough to include it in your company. It is time, you get over the annual inventory counts and bring to use the cycle inventory program to ensure optimal inventory management. Here are some tips that you need to keep in mind to develop your cycle counting plans.

  • For the cycle counting plan to prove worthwhile, it must be made a part of your daily or weekly routine. A lot of companies who do include cycle counting programs fail because they make a mistake of not counting their inventory very often. Those who rely on the sporadic cycle counts receive only sporadic results. Thus, you can benefit only if you count your inventory regularly, daily or weekly.
  • Next, you must create a schedule for your cycle counts. Each company is different thus the schedule that works best for you must be adopted. We, however, recommend a 13-week cycle counting calendar. This would mean that every item in your warehouse is counted at least once during the cycle of 13 weeks.
  • Last but not the least, plan and prepare well before you begin counting. Preparation is a valuable asset to assure a successful physical count. The same is also important for cycle counting. Ensure that your warehouse is well organized and you have a proper plan in place for authentic inventory counting process.

Final Say

Hopefully, the stated benefits of cycle counting over annual inventory counts will nudge you to prefer the former. If you have noticed any other benefit of cycle counting over annual inventory counts, do tell us about it in the comment box below.

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4 thoughts on “Top 6 Benefits of Cycle Counting vs Annual Inventory Counts

  1. Hi, thanks for the applaud we’re glad you liked this article. Stay tuned to learn more about shipping facts & trends.

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