Posted on Leave a comment

Daily Cycle Counts as Risk Management for Your Warehouse

Personal fitness requires a balanced diet, getting enough sleep, and regular exercise. The health of your warehouse isn’t much different. Maintaining order and high performance at your warehouse requires that you perform your own set of daily and weekly habits including labeling and receiving, putaway, cycle counts, picking for production, and of course shipping.

In a perfect world, cycle counts would be obsolete because no inventory would be misplaced or lost. But we don’t live in a perfect world so we have to make plans that include things like risk management. We anticipate risks when we buy insurance to protect our cars and homes. Daily cycle counts function as insurance and risk management for your warehouse.

So let’s break down three approaches to consider when performing a daily cycle count.

Performing cycle counts across all pick locations a minimum of once per month is a must.

Cycle Counts by Pick Location

A generalized approach is to commit to counting every pick location a minimum of once per month. Locations with the highest through-put will logically require more regular counting.

Tip: While this may sound like common sense, you must stop all picking and replenishing activities while counting a picking location. It’s faster to pause and do it once, rather than having to backtrack and recount an area. 

ABC methodology prioritizes frequency of cycle according to revenue generated by product.

Pick By ABC Categories 

With ABC methodology, your inventory is split up into three groups. “Group A” is comprised of products that make up 80% of your sales (which are those that will be most frequently counted). “Group B” includes products comprising the next 16% of your sales and, you guessed it, “Group C” covers the final 4% of products. You can also apply the 80/20 rule with this methodology (20% of your products result in 80% of your sales). Using the ABC method, the frequency of inventory turns for your products determines the frequency of cycle counts.

No matter which approach you choose for cycle counts, it's important that you prioritize performing them regularly and consistently.  Paradigm Electronics Inc.

Values-Based Approach to Cycle Counts

Another approach to cycle counts focuses on the raw materials: materials that are most valuable or those with the highest volume correspond to those counted most frequently. A great hybrid approach is to blend the two: most frequently count items that are most valuable and most frequently used. That said, if you don’t regularly count low-value items, your production process may be affected by unexpected shortages of these materials.

Scheduling daily cycle counts helps ensure that the area you're counting will be free of picking and replenishment activities. 

Best Practice #1: Stick to a Strict Schedule

Regardless of which approach to cycle counting you choose, best practice requires that you schedule and consistently follow through with your daily cycle counts. Avoid scheduling counts during hours with high pick and replenishment rates.

Best Practice #2: Trace

Best practice for performing cycle counts also includes detailing trace information including expiry dates and lot numbers. Oftentimes cycle counts are followed by processing of expired or near expired inventory.

Car manufacturers are meticulous about keeping records of trace information throughout their whole production process.

Conclusion

When performed regularly, daily cycle counts begin to function as an insurance policy for your warehouse, protecting you from unforeseen problems like material shortages. Not only that, but cycle counts will also empower you to achieve high rates of inventory accuracy.

To learn more about running a high performing warehouse, check out this article on "4 Evidence Based Best Practices for Warehouses."

Leave a Reply

Your email address will not be published. Required fields are marked *