Cycle counting is a highly efficient method of taking inventory. Rather than hunkering down and taking full inventory all at once, a smaller portion of the inventory is accounted for on different days, cyclically. Many brands have adopted this method as it is quicker, more manageable, and much more accurate than attempting to manage the entire inventory in one go.
Accuracy and efficiency are a the cornerstone of taking inventory, and yet retailers often have to sacrifice one for the other. Cycle counting eliminates that problem. This method is especially important and useful if you have a larger product base.
The Benefits of Cycle Counting
Cycle Counting Improves Customer Satisfaction
By evaluating smaller subsets of the inventory, employees are able to pick up on any products that may be defective and handle them before they ever make it into the customer's hands. As a result, this reduces the amount of returns and customer complaints, subsequently improving the reputation of your company.
Cycle Counting is More Accurate
Again, because employees are taking count of a portion of the inventory, rather than all of it at once, it is much more accurate. Employees are able to double check and take a recount quickly, just in case they missed anything. It's much more manageable.
Cycle Counting Saves Time
Although employees are taking inventory more often, it is balanced out by how much faster it is to execute cycle counting. This saves valuable downtime that is poured into taking a full, physical inventory audit.
Methods of Cycle Counting
While you could create your own system of cycle counting, there are already a few methods that have been implemented by a wide variety of retailers and have been proven effective. These include...
ABC Cycle Counting
The main premise behind ABC cycle counting is to break your inventory down into three categories:
- The A Category are your most valuable and fastest selling products. Generally, companies will include the top 20 percent of their products by velocity in this category, but you could tailor this threshold to suit your needs.
- The C Category on the other hand, are your products that are least in customer demand. As in, the products that tend to sit on the shelf for awhile. Generally, companies will include the lowest 15 to 20 percent of their products in this category, but you could tailor this threshold to suit your needs.
- The B Category consists of everything else; all of the products that are in between categories A and C. They aren't your fastest moving products, but they don't sit for as long as the inventory within the C category, either.
Companies often opt for the ABC cycle counting method because it is flexible and customizable. It also gives you a chance to evaluate what's selling and what isn't, which helps you restock in the future. Trends are subject to change, and this method keeps you as well as your employees up to date with "what's hot."
Pareto Cycle Counting Method
The pareto cycle counting method is derived from the pareto principle, also known as the "80/20" rule. This principle holds that 80 percent of the effects come from 20 percent of the causes.
With that in mind, the pareto method prioritizes frequently taking inventory of products that are high in demand, while products that don't have the same velocity are counted less frequently.
Surface Area Cycle Counting Method
The surface area cycle counting method is based on the layout and surface area of your store. The products are counted from the beginning of the isles and displays to the very end. Each area is assigned to a counter.
This method of cycle counting requires planning and a map of how your store is laid out. Counting forms help keep track of the stock and inventory needs of each area, which are then used to update the inventory management system.
Cycle counting is a highly efficient and effective method of keeping inventory. It reduces the stress and time poured into taking full inventory by dividing the products into different sections. There are a variety of cycle counting processes that have been implemented across retailers, such as the ABC, Pareto, and surface area methods. Of course, any of these methods can be customized to better suit your needs, or you could develop your own.