Cycle Counting in the ERP System

Today I am going to discuss cycle counting in the ERP System. The ultimate goal of a cycle count program is to achieve high inventory accuracy.But to achieve high inventory accuracy a robust cycle count process must be used.Cycle count process consists of following tenets:-

ABC Classification:-

• ABC classification is a method which is used to rank parts by their relative importance.First of all it is important to decide how many classes are required to effectively manage the parts.The best practice is to catagorize in three parts i.e A,B,C. Although some organization may catagorize in A+ or A,B,C and D.The importance of items decreases from A to C i.e class A items are more important than the Class B items and Class B items are more important than the Class C items and so on.It is important that Class A items are often counted than other items as they are of more importance.Those inventory items which do not need counting can be grouped under Class D.
• It is important to keep less percentage of items in Class A and let more items to fall in Class C,it may seem that more items should fall in class A as they will be often counted but it will increse the overhead on warehouse personnel.So it is very important to keep only important items in Class A.
• Criteria for calculating ABC classification differs for most of the ERP products.But standard practice is to use historical transactional value of the item in the previous year.

Cycle Count Definition:-

• First of all decide the locations which needs to be counted.Generally warehouse is divided into different areas like receiving,storage and packaging areas etc.
• Next step is to decide the number of counts per class.Already discussed Class A items will be more often counted than other items.
• The duration of the cycle count should be decided.When a cycle count is defined in the ERP System then start and end date should be provided for that,on the basis of this count is generated for that period.
• when the count quantity is entered outside the tolerance limits then many ERP packages offers recount automatically which helps in weeding out manual counting errors and thus improves the total inventory accuracy.It is good for small size business or where velocity of movement of material is low to set up periodic cycle count.

Cycle Count Execution:-

• Counters can start early in the morning before the shifts starts for the plants running one shift.Plants running multiple shifts can choose a time during  night shifts or when fewer transactions are going into the system.If there is any delay between the actual picking or put away of the material and recording of the data then it may happen that material is picked from location but might not be entered in the system.It will cause incorrect adjustment if counting exactly happens at this point.Use handheld radio frequency devices to record transactions at point of use.Data entry errors can be avoided if we mobile devices which work mainly by scanning barcodes for various data fields.