Cycle Counting for Inventory Accuracy
 By Dennis Lord - Inventory Guru


Not so long ago and not so far away, Frank, a Materials Manager, asked the Inventory Guru this question: “How important are accurate inventory records to the success of our Inventory Management System?”

“Accurate records are absolutely a key essential for Inventory Management Success.”

“Our inventory records are 85% accurate,” Frank responded. “Isn’t that good enough?”

“I’m afraid not. When inventory records are not 95+% accurate, it is most difficult to purchase the right materials in a timely manner, produce efficient manufacturing schedules and provide customers with reliable, on-time deliveries.”

“What can I do to achieve Inventory Accuracy Nirvana, oh wise Guru?” Frank pleaded.

“You must implement CYCLE COUNTING. It is the Key to Inventory Management Success. There are 10 essential steps you should follow so that Inventory Accuracy will be with you always.”

1. EDUCATE KEY PERSONNEL.

Invest the time to assure that key people are educated and trained in the concepts and benefits of achieving 95 – 98% inventory record accuracy using Cycle Counting.

2. ASSIGN CLEAR LINES OF ACCOUNTABILITY AND RESPONSIBILITY.

Identify and recognize individuals within the organization who are accountable and responsible for assuring accurate inventory records are the norm.

3. ENSURE COMPANY POLICIES AND OPERATING PROCEDURES ARE IN ORDER.

Review your policies, operating procedures and training methods and make then current where necessary.

4. REVIEW INENTORY STORAGE METHODS AND YOUR INVENTORY LOCATOR SYSTEM.

Know where your inventory is at all times. Check inventory storage methods including fixed racks, bins, supplier containers and kanbans to ensure suitability. Also, make sure you have confidence with your inventory locator system.

5. AUDIT THE FLOW OF INVENTORY

Make sure materials are accounted for as they move into and out of your stock room and implement point of use locations whenever possible.

6. INVENTORY TRANSACTION PROCESSES

Complete inventory transactions changes in a timely and accurate manner.

7. IMPLEMENT THE CYCLE COUNTING PROGRAM.

Select items to be counted and the frequency of counting necessary to achieve 95+ % inventory accuracy.

8. IDENTIFY THE ROOT CAUSES OF ERRORS.

There will be systemic errors if your accuracy level is below 95%. Identify the “Root” causes of each error and eliminate each one.

9. RECONCILE THE COUNT.

Correct the perpetual records to agree with the cycle count after the accuracy problems are audited and analyzed and fixed.

10. ESTABLISH PERFORMANCE MEASUREMENT AND REPORTING CRITERIA.

Set up specific criteria for measuring and reporting performance so you can see the positive effect of Cycle Counting.

It is very gratifying to go back to companies that have successfully implemented Cycle Counting. I usually hear that because the inventory records are 95+% accurate, customer fill rates, manufacturing efficiency, purchase order cycle times and a host of other key operations measurements have improved tremendously.

Cycle Counting is Key to Inventory Management Success. With accurate inventory records in place, a move to 21st century Supply Chain Management will realize significant and continuous improvements in all aspects of your operation for years to come.

Dennis Lord CPIM is executive director of Inventory management Solutions/IMS Consulting.

He can be reached at 416.477-2467, dennis@imsconsulting.ca