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Inventory Cycle Counting – Types, Best Practices, Advantages in E-commerce Operations

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Mar 11, 2023 | E-commerce Industry, Inventory Management

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Home > Blog > Inventory Cycle Counting – Types, Best Practices, Advantages in E-commerce Operations

What is Inventory Cycle Count?

Inventory cycle count is the method of auditing your entire inventory regularly by checking up on various aspects of the items present in your facilities based on their availability, date of manufacturing, date of expiry, and other factors that may affect the management of high-value items. It is important to note that inventory cycle counts can help reduce the risk of human error in stock management.

Implementing the right inventory cycle count methods not only reduces or eliminates the need for periodically or annually counting the physical inventories but also helps you have real-time and faster updates on your day-to-day operations. By regularly monitoring stock levels, you can ensure that you always have the right amount of stock on hand to meet customer demand.

Cycle count has now become one of the most innovative and well-developed methods of managing stock for retailers, manufacturers, and even e-commerce sellers, as it provides an effective alternative to traditional inventory management methods. It helps to improve both the productivity and efficiency of your warehouse, breaking the stock into bite-sized and manageable pieces.

While inventory cycle count has taken over the traditional physical count methods, you may wonder which one is better for your business and why other sellers have moved towards the new and automated process of inventory cycle count. 

This blog is designed to offer you a complete perspective into both these methods, the advantages that inventory cycle count offers over the physical count, and the impacts that several e-commerce businesses have seen post-implementation of cycle counting. Read on to find out more.

What is the Purpose of Cycle Counting in Inventory Management?

First off, it is important to understand the need and purpose of any solution or system and why cycle count in an effective inventory management system is necessary for your e-commerce business.

Cycle counting is a method that not only helps you keep track of all your stock but also ensures that you are always well-informed about the needs of your e-commerce business in order to provide better serviceability to your customers and maximize your overall profits. Accurate inventory is crucial for any e-commerce business, and cycle counting is an effective way to achieve it.

In brief, the main purposes of cycle count are:

  • To check that the location (shelf) of every item is correctly mapped.
  • To verify that the physical count of the inventory is same as that recorded in the system.
  • To reconcile the missing and extra items found on different shelves.

1. Correct Mapping of Inventory: Cycle count guarantees that the location, i.e.the shelves of each of the items, is mapped correctly and eases the process of picking when an order is received.

2. Accurate Analysis of Physically Recorded Data: The major task of cycle count is to compare the records of the stock present in your warehouse facility made via physical counts and then provide error-free reporting of each item.

3. Reconciliation of Missing Items: When you get error-free reports and analysis of all the inventory present in your warehouse and the correct status of each of the items, you can easily act upon any discrepancies and errors encountered during the cycle counts.

Key Differences: Cycle Count versus Physical Count in Inventory Management?

Unlike Inventory Cycle count, Physical inventory count is the method of counting all products owned by a seller in a warehouse and then matching the same with the book records. The process requires manpower assistance, is long to perform, and so is only done annually. Here is a side-by-side comparison of the Cycle count and Physical count to help you better understand the overall deliverables of both processes and what you can expect from each of the methods.

Cycle Count versus Physical Count –

Cycle Count Physical Count
Automated Operations Manual Operations
Faster Processes Time-consuming Processes
No Inventory Variances Inventory Variances
No Downtime Required Requires Operational Downtime
Can be conducted rapidly in a year Can be conducted once a year
Scheduling can be done No option for scheduling

 

You can very well compare and see the extremely high advantages of choosing Cycle count and how inconvenient it actually is to go for Physical count. While for large e-commerce businesses, it is impossible to shut down operations even for a day, small businesses do not have so much manpower to go through the entire process of physically counting each and every stock available and then making notes of it in the company book, and so for both sizes of e-commerce businesses, the inventory cycle count, which involves frequent counts, is always recommended.

What are the Different Types of Cycle Count in Inventory Management?

types of inventory cycle count

Cycle count can be done in various ways, and companies around the world use the methods of cycle counting that suit their e-commerce business best. There are predominantly three major types of inventory cycle counting:

1. Random Sample Cycle Count: Random sample cycle counting is done majorly for large warehouse facilities where the system selects a group of items randomly for each cycle count. These selected pieces of stock are then removed from the list of cycle counts one by one each day till all of the products have been randomly counted at least once, and after the first random cycle counting process is complete, the entire cycle begins again.

what is random sample cycle count method

2. ABC Cycle Count Methodology: ABC cycle counting method is another form that is widely used by e-commerce businesses as it works on distributing inventory into categories A, B, and C based on their valuation. ‘A’ items are those which hold high worth in the entire facility and require constant checks, ‘B’ items are those that hold lesser value than ‘A’ items but make up for the most number of products present in the warehouse, and so, they require counting 3 to 4 times in a single counting cycle. ‘C’ items are the least priority items and require counting only once or twice in an entire year.

what is abc inventory cycle count method

3. Control Group Cycle Count: Control group cycle counting is the third form of inventory cycle counts performed by various sellers as it allows them the chance to select items they wish to count repeatedly within a set period of time. In this method, as a specific group of items is selected to go through the counting process, e-commerce businesses have visibility over the entire cycle counting system, how it works, and if there are any errors in the process, which are then identified and worked upon to better the counting methods.

Based on your business type and need, you can select either of these cycle counting methods for your warehouse and manage all your stock levels accurately and efficiently to provide better services to your customers.

Inventory Cycle Counting – Best Practices for E-commerce Companies

Even though you may have chosen the correct method of cycle counting for your facilities, you may still encounter inaccuracies that might affect the overall performance of your e-commerce business.

inventory cycle counting best practices

But knowing the right methods and strategies to enhance your cycle counting methods can help you make the most out of these methods. Some of the best practices to amplify your cycle counting process and improve daily operations include:

  • Exercise regular cycle counts for all inventory 
  • Focus on one type or category of products at a time
  • Prioritize categories for cycle count by seasonality 
  • Restrict modifications of stocks in between the cycle count 
  • Perform 2-3 cycle counts for each category of products 
  • Rotate the schedule of cycle count randomly 
  • Maintain proper documentation for each cycle count

What are the Advantages of Cycle Counting for E-commerce Businesses?

Now that you are well aware of the purpose, the types, and the best practices to follow while implementing the right cycle counting methods for your e-commerce business, you should also know the major benefits of the process as well. 

top advantages of inventory cycle counting

Inventory cycle counting can offer you tons of advantages and can really empower your warehouse staff to perform crucial tasks with ease, accuracy, and efficiency. The biggest benefits of using cycle counting include the following:

1. Easier and Quicker Operations: Cycle Counting is a very quick process that enables better tracking as the method can be divided into small targets as well. These targets, called sub-cycle counts, have their individual shelves, which can then be tracked and counted.

2. Higher Inventory Accuracy: As Cycle Counting is done at the complete warehouse level, it validates the count and location of all stock present in the warehouse providing real-time inventory updates. Any discrepancy found while counting will be picked up, and relevant actions can be taken.

3. Cost-Effectiveness: Cycle counting eliminates the need to rely on heavy manpower to perform the task, reduces the error that might have been caused due to manual dependencies, and also helps e-commerce businesses to avoid warehouse shutdowns.

4. Faster Identification of Inventory Shrinkage: With Cycle Count, your most valuable items can be counted more frequently, and any kind of theft, damage, or misconduct can be identified easily. This renews the physical inventory presence in the warehouse and reduces shrinkage. It also helps you manage your customer services.

5. Lower Order Cancellation Rates: By performing locations based or zone-based inventory audits, your warehouse staff processes orders more accurately, reducing the overall cancellation requests raised by customers due to incorrect or poor product delivery. 

6. No Restrictions on Performance: Cycle count provides immense flexibility to sellers as the process does not require you to completely shut down the warehouse for completion of the process, unlike in the traditional physical counting method, and saves you from suffering through sales loss.

Read – How Unicommerce helped comprehensive support of inbound and outbound warehouse processes through advanced features like cycle count, FIFO, etc.

What makes Cycle Count the Backbone of Warehouse Operations?

Precise inventory management leads to better customer experience, higher sales, and amplified business growth, and these can be easily achieved when you deploy the right cycle counting methods.

Keeping this in mind, companies worldwide are investing in various inventory cycle counting systems or a similar technologically superior e-commerce WMS to amplify their business performance and to experience higher ROI.

The advantages that your business experiences on choosing a high-performing cycle counting method right from advanced operations, lower rates of cancellations and returns, accurate handling of inventory shrinkage, etc., yield results that enhance the productivity of your warehouse staff as well as ensure that your customers are going to get the best of your services without errors and delays because you get to promise faster order fulfillment processes, preferably next day dispatches and a lot more. 

Without proper stock control, it becomes difficult to make decisions about any other aspect of your e-commerce business. And so, it is important to utilize Cycle Counting, which has been changing the way companies are doing business with one or more warehouses at a time. This feature is one of the most efficient ways of managing stock accuracy and visibility in warehouses of all shapes and sizes. 

Read – How a leading footwear brand managed 11 Mn+ Live Inventory Count

When you deploy the right automated system, you also reduce the instances of doing cycle count, as inventory gets managed and maintained automatically, reducing the chances of errors or discrepancies, with which you manage your stock levels with superiority and, in turn, manage your customers with excellence, making it a key differentiator for your e-commerce business. 

Enhance your sales strategies, optimize reorder points, and ensure customer satisfaction with Unicommerce Inventory, a comprehensive inventory control system.

So what are you waiting for? Get in touch with us today and unlock the ways to succeed in your e-commerce business as well!

Related Read –

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