What is Inventory Cycle Counting & Why to Use it for Effective Warehouse Management?

by | Apr 11, 2021 | Inventory Management, Marketplaces, Order Fulfillment

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What is Cycle Count or Inventory Cycle Count?

Inventory cycle count or inventory cycle is the method of auditing your stocks regularly by checking up various aspects of the items present in your facilities based on their availability, date of manufacturing, date of expiry, etc.

Implementing the right inventory cycle count methods not only reduce or eliminate 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. 

Cycle counting has now become one of the most innovative and well-developed methods of managing inventory for retailers, manufacturers, and even eCommerce sellers as it helps to improve both productivity and efficiency of your warehouse, breaking the inventory into bite-sized and manageable pieces. 

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

This blog is designed to offer you a complete perspective into both these methods, the advantages that cycle count offers over the physical count and the impacts that several eCommerce 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 counting in inventory management system is necessary for your eCommerce business?

Cycle counting is a method that not only helps you keep track of all your inventory, but it also ensures that you are always well informed about the needs of your eCommerce business in order to provide better serviceability to your customers and to maximize your overall profits. 

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 counting 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 counting is to compare the records of the inventory 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.

What is the difference between Cycle Count & Physical Count?

Unlike Cycle count, Physical count is the method of counting all products owned by a seller in a warehouse and then matching the same with the inventory book records. The process requires manpower assistance is long to perform and so is only done annually.

Here is a side by side comparison for Cycle count and Physical count to help you better understand the overall deliverables of both processes and what all can you expect from each of the methods. 

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 of scheduling

You can very well compare and see the extremely high advantages of choosing Cycle counting and how inconvenient it actually is to go for Physical count. 

While for large eCommerce 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 inventory available and then making notes of it in the company book, and so for both sizes of eCommerce businesses, inventory cycle count is always recommended.

What are the Different Types of Cycle Count?

Cycle count can be done in various ways and companies around the world use the methods of cycle counting that suit their eCommerce business best. There are predominantly 3 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 inventory are then removed from the list of cycle count 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.
  2. ABC Cycle Count: ABC cycle counting method is another form that is widely used by eCommerce 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.
  3. Control Group Cycle Count: Control group cycle counting is the third form of 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 are selected to go through the counting process, eCommerce 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 inventory accurately and efficiently to provide better services to your customers. 

What are the Best Practices of Inventory Cycle Counting?

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

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 includes:

  • Exercise regular cycle counts for all inventory 
  • Focus on one type or category of products at a time
  • Prioritise 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?

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

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:

  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 be then 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 inventory 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 in order to perform the task, reduces the error that might have been caused due to manual dependencies and also helps eCommerce 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.

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 fulfilment processes, preferably next day dispatches and a lot more. 

Without proper inventory control, it becomes difficult to make decisions about any other aspect of your eCommerce business. And so, it is important to utilize Cycle Counting that 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 inventory accuracy and visibility in warehouses of all shapes and sizes. 

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 inventory with superiority, and in turn manage your customers with excellence, making it a key differentiator for your eCommerce business. 

So what are you waiting for? Get in touch with us today and unlock the ways of success your eCommerce business as well!