Cycle counting is an inventory system that involves counting a small subset of inventory frequently throughout the year. Traditional physical inventory, on the other hand, is based on counting all of your inventory at the same time. Generally, for most rental companies that equates to once per year.
So why bother with cycle counting? There are two main benefits of adopting cycle counting:
- To minimize the time you need to shut down your rental branches. A physical inventory is likely to take a day or more to get ready for the count and another day to physically count all merchandise and equipment. Compare that to counting a single category/class of equipment in much shorter time frames once per quarter. The smaller cycle counts can easily fit between other rental tasks and would not require shutting the entire shop down.
- Cycle counting also enables you to discover errors or theft sooner rather than later. More frequent counts can find discrepancies faster and allow you to account for variances earlier. It can also uncover any process issues that exists and allow you more time to addresses with policy changes or training.
To determine your cycle count plan, first see how many items your teams can count in the amount of time you want to allot per day. Then take the total number of SKUs or items you want to count and divide by the number you plan to count per day. Then you can calculate the number of times you can count each SKU per year. For example, if your branch has 1000 items in inventory and your team can count 20 parts per day, you will need 50 days to count your inventory. That means you can count each part approximately 5 times per year.
A good ERP system can help you create the process to execute cycle counts. There is built-in functionality to schedule counts of equipment, parts and merchandise in each of your branches. The software program can create count sheets that can be pushed to the branches to facilitate the work. The inventory counts can then be pushed back to the system for comparison and reporting.
If you interested in giving cycle counting a try, give us a shout.