Ask the DC Doctor

Welcome to a new recurring feature, in which Bill Kuipers, president of Haskell, NJ-based operational consultancy Spaide Kuipers, diagnoses your warehouse and fulfillment ills and prescribes a solution.

Q: Can cycle counting improve accuracy of my inventory?

A: Cycle counting—which allows you to track the amount of inventory in your warehouse on a more frequent basis—is more of a report card after the fact than it is a tool to ensure inventory accuracy. While it is obviously necessary to correct inventory errors, it is not sufficient to maintain an accurate inventory by itself.

I believe that the most accurate inventories are a result of a well-organized and well-managed operation–an environment where your associates follow disciplined methods and have complete respect for the integrity of the inventory. Similarly, the more complete your systems support and operating methods are, the more accurate the inventory will be. I’m not sure how sophisticated your current systems and operating processes are, but that’s generally the place to start. The fewer errors there are, the less dependent you will be on a cycle-counting program.

Cycle counting should be the icing on the cake. As a first step, it is very important to classify your inventory into A, B, and C categories, where A items are your best moving (usually the top 10% of your products), and C items are your slowest moving (usually 65% -80% of your items). The A items should be counted more frequently (once a month) and the C items less frequently (once or twice a year).

Rather than just basing cycle counting on that schedule, however, I strongly prefer a combination of counting by item and by location. Particularly in the reserve storage area (also called bulk storage or overflow), it is very common for items to be in a different location than what the system shows. If you just counted the locations that the system directed you to for a cycle count, you would never find the other locations where the item actually is.

For that reason, this is what we propose:

On an ongoing basis, count entire rows or sections of the reserve area, not just specific locations. Count one row or section today, count the next one tomorrow, and so on until the entire facility has been counted. Then start again. This will find all the stock (and where it’s located), and not just confirm specific locations.

In addition to the rolling count of the reserve area, you should also count the primary location (in other words, the picking area) for the items being cycle-counted. What we usually do for the items be cycle-counted is count the primary location, then the entire row including the reserve location for the items being counted—and we count all items in that row, not just the item being checked. This will keep the overall inventory far more accurate, even though you’re not getting a specific cycle count by item.

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