Woman
with tablet in DCFor many supply chain professionals the annual physical
inventory in the warehouse is a dreaded process. For many companies this
process can span many days and involve numerous employees both in the warehouse
and the office. Every item in the
warehouse is painstakingly counted, labeled and compared against the inventory
of record and every discrepancy must be researched to rectify. To say the least, the process is time
consuming and labor intensive and can also be, at its worst, disruptive to the
operation.
It
is because of these reasons that many companies explore alternatives to
conducting annual physical inventories.
For companies that possess the capabilities, incremental cycle counting
is a way of eliminating the physical inventory and maintaining faster, more
accurate real-time control of inventory within the four walls of the
distribution center.
What
is cycle counting? Cycle counting is
essentially designating a certain number of products or bins each day to be
counted so that over the course of the 12 month period the entire distribution
center is counted perhaps several times and errors are rectified at the time
that they are identified. There are a
number of advantages to this process, not the least of which is the fact that
the inventory accuracy is progressively corrected rather than having it done is
one giant step once a year. Cycle
counting is also usually less labor intensive since it can be worked into the
normal workflow of the distribution center.
Here are some key concepts to think about when undertaking a cycle counting
program in your company.
Point
#1: Consider counting by bin rather than by product
With
less sophisticated inventory control systems where real-time bin-level
inventory tracking does not exist, it may only be possible to cycle count by
counting by product. For example, if the
same SKU exists in three different locations throughout the warehouse (two
overstock locations, and one forward pick location) then all three locations
must be visited and counted without any product being moved or picked from
those locations during the counting period.
However, real-time warehousing systems that maintain bin-level accuracy
do not require counting by product. In these instances, it may only be
necessary to count by bin. For example,
if the two overstock locations of the product consist of full pallets that are
stretch wrapped, it may be unlikely that the inventory is inaccurate at these
locations. However, the forward pick
location that contains the same item may have loose product that has been
accessed frequently. There could be a much greater likelihood that this
inventory is inaccurate. Therefore it may only be necessary to trigger a cycle
count at this particular bin (the forward pick bin) and count the others at a
different time. Counting by bin also
makes it possible to count a series of bins in a given geographic area of the
warehouse which can be done quickly and efficiently rather than traveling all
over the warehouse searching for different bins that contain the same
item. Counting by bin also offers more
real time capabilities since it is unlikely that the bin will be compromised by
other picks or puts during the counting process.
Point
#2: Count the items most likely to be
wrong
As
eluded to in the previous point, the more frequently a bin is accessed by a
worker, the greater the likelihood an error has been made and the inventory is
not accurate (forward pick bins are usually less accurate than overstock
bins). Therefore while it is important
to count all the bins in a warehouse with some level of regularity, it is very
important to count the “high touch” bins more frequently than bins that are not
accessed as often. A sophisticated
warehouse management software (WMS) system can manage this process. It can identify the bins which are accessed
most frequently and assign them an A priority for more frequent counting, say
every three months rather than on a yearly basis. This way it is possible to ensure the
available labor is deployed in the areas where it is mostly likely to be of
benefit.
Point
#3: Interleaved Cycle Count
It
is possible with some WMS systems to interleave cycle counting with the normal
workflow of the warehouse. For instance,
if a worker has to go to a given location to pick product and the WMS knows
that there are two bins that require cycle counting very close to the bin where
the pick is to be performed, the picker can be instructed to temporarily stop
picking the order and go and count those bins and then resume his work. In this way, travel time in the cycle
counting process is minimized. A word of
caution here, however. It is sometimes advantageous to have dedicated inventory
control cycle counters in the warehouse rather than making all of the workers
in the warehouse responsible for performing this task. Accuracy and precision are most likely to
suffer when cycle counting is the responsibility of a large group of
people. It should also be pointed out
that many WMS systems do not have the level of sophistication required to enable
interleaved cycle counting.
Point
#4: Perform empty bin cycle counts
An
easy way to work cycle counting into the normal workflow is empty bin cycle
counting. If a picker goes to a bin and
picks the last item from the bin, depleting to a quantity of zero, then the WMS
system can question the picker and ask him/her to verify that the bin is in fact
empty. A simple keystroke can confirm
that the bin is or is not empty. This
form of cycle counting takes almost no additional time to perform, and for
high-volume items, can satisfy the need for cycle counting that bin.
Point
#5: Cycle counting on the fly
In
instances where there is an unexpected shortage of product at the pick bin,
some WMS systems can trigger an automatic cycle count of that bin to rectify an
inventory error immediately. Even
without this capability, it is a best practice in distribution to require an
immediate cycle count of a bin that the contents are known to not be accurate.
In
conclusion, effective cycle counting can significantly improve inventory
accuracy and reduce labor requirements.
It can eliminate the disruptive act of shutting down the warehouse for
several days to count product and dealing with the resulting customer service
issues. It should be pointed out that
most, if not all of the suggestions mentioned above require the use of a
real-time WMS system. Some of the more
basic suggestions such as counting by bin and counting the bins with the
frequent hits, are capabilities resident in mid-tier WMS systems. Capabilities such as task interleaving often
require tier one systems to be able to implement. Another alternative which will not eliminate
the physical inventory but may potentially alleviate some of the more onerous
aspects of it, involves outsourcing inventory to a third party firm. Inventory specialists can come in the
distribution centers with bar code scanners and rapidly take a physical inventory
with a large amount of manpower in a short period of time. The data can then be uploaded into the
company’s inventory management system and discrepancies can then be
investigated. While not inexpensive,
this option can potentially complete the physical inventory in a short period
of time with workers who are trained on a day-to-day basis to count product and
perform inventories. Outsourcing the
physical inventory is also worth considering if cycle counting is not possible
for technology or other reasons.
http://blogs.dcvelocity.com/distribution_center/2015/03/cycle-counting-an-alternative-to-the-annual-physical-inventory-in-the-distribution-center.html