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Spring Cleaning: How Software Can Improve Cycle Counting and Physical Inventory Auditing Procedures

Posted by Jeff Kole on April 13, 2017 at 10:05 AM

Inventory_Management

It's the beginning of spring, which means it is a great time to evaluate and improve upon some of your business processes. Your company's inventory is something that should always be tracked closely, and the tools and techniques you use to track it should be efficient and relatively easy to manage.

Companies that store significant amounts of inventory should have processes in place to assure that they can track their inventory levels. If your inventory practices are not clean, your company could run the risk of losing business by not having enough inventory, having inventory expire, or having too much inventory, which can take up valuable space and may never be needed. Despite having a trustworthy robust ERP system that accurately updates inventory it is necessary to verify your actual inventory. Today, most businesses use two inventory auditing procedures, both of which will be described in the next section, they are: 1. Cycle Counting; and 2. Total Physical Inventory.

To cut down on the time spent and hassle of conducting inventory counts, many companies now use Bar Coding or RF devices to perform their inventory counting. Companies that manually count inventory should strongly consider automating to help improve this process.

Cycle Counting vs. Total Physical Inventory

Cycle counting and total physical inventory are two approaches your business can take to audit its inventory. They both have pros and cons, however, software solutions can negate or lessen the downside associated with each.

Cycle Counting

Cycle counting is an inventory counting procedure where a small portion of a business' inventory is counted and then extrapolated out to obtain an estimate of the inventory for the whole location. This method of sampling is common practice in several industries, and should be strongly considered for all warehouses that have a high degree of inventory accuracy. If your business does not have a high degree of inventory accuracy, cycle counting loses some of its value as an auditing practice. However, when utilizing bar codes or RF devices, a cycle count can be simple and accurate process because that equipment and the software will allow for a higher inventory accuracy and a quicker audit.

Total Physical Inventory

Total physical inventory is an inventory counting procedure where a business counts its entire inventory. The results are going to be more accurate than a cycle count, however, this process can be far more time consuming. A total physical inventory usually requires a business to cease or slow operations for a relatively lengthy period to conduct the auditing process. That said, if a business needs to get an exact inventory count, conducting a physical inventory is the way to go. Additionally, utilizing the right automation will allow for a full physical inventory to be taken in a much more expedient fashion.

Streamline Your Inventory Auditing Processes

There are several solutions that can automate inventory auditing practices and allow you to focus on the other areas of your business. These solutions can be standalone programs or a part of your company's enterprise resource planning (ERP) system. If your company uses an ERP system with an inventory tracking feature, the processes can be further simplified as the ERP system is likely to hold significant amount of information about your business and its inventory. For example, the cycle counting process can be conducted by having the software direct the counter to the exact storage location of the products that are to be counted.

Utilizing software solutions can allow for you to save time while conducting your inventory auditing with greater accuracy. These solutions use bar code equipment and labels to track inventory as it comes in and out, and allow for your business to conduct inventory audits with much greater ease. The use of these tools will eliminate the need for your business to hand write the counts and enter them into your system. Furthermore, using these tools eliminates the downside to each auditing practice. When using the right software, a full physical inventory is not as time consuming a processes. Additionally, you will reach a much higher degree of inventory accuracy so the risk of imprecise estimates when using cycle counting is greatly lessened.

If your business is not using automation to assist in the inventory auditing process, considering solutions should be a priority during this spring cleaning.

 


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Topics: Best Practices

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