cycle counts

With an automated point of sale system, retailers can track their inventory better than ever before. It’s a great tool to save time and money. It also makes counting physical inventory easier. And, if you’re doing this on an annual basis, then you may want to change your procedures.

Switch to Cycle Counting

Retail business are open to greater risk when taking physical counts on an annual basis. Annual counts interrupt business operations and are less accurate because of the amount of repetition and number of SKUs involved. Also, learning about problems with inventory levels comes too late to correct, therefore resulting in a loss of profit.

Cycle counting your inventory eliminates many of these problems. It continuously reconciles the accuracy of your point of sale data with the physical inventory through a plan focusing on frequent counts throughout the year.

The Benefits

Big box stores use cycle counts because they have so many items to count that it would require closing the doors for a day or two to do it. That’s a lot of lost revenue.

It’s time to take a tip from big box’s success and operate your store the same way. Increased frequency of physical counts can do a lot of things:

  • Improve accuracy
  • Lower incidents of pilferage
  • Have fewer items go out of stock
  • Reduce the amount of safety stock
  • Help automate replenishment of stock
  • Increase operational efficiencies
  • Better customer service
  • Improve the order and cleanliness of store shelves
  • Provide advanced warning for any problems

This is a long list. Other benefits are more indirect and less quantifiable, such as reduced management time and fewer audits.

Process Planning and Implementation

Cycle counts have to be thoughtfully planned. It’s not something that can be completed without guidance or done sporadically. Here are some steps to get your cycle counting plan in motion.

1. Write the plan.

The procedures for cycle counting of physical inventory are the same. All transactions within the category must be closed and no new transactions can be made until the count is complete. One item on the shelf equals one item in the computer. The only thing different is separating everything into categories and subcategories. Most of this is already done in your point of sale software. Then, figure on counting your entire inventory over a 13-week period. For higher volume and faster turning products, you should count them two or three times during this period.

2. Schedule your counts.

Use your calendar to schedule the days that are best for counting. Get your employees in on the plan and utilize their downtime on slow days to accomplish this task. Make sure that everyone participating knows exactly which SKUs to count and how to enter the data.

3. Review

Essentially, you are performing an audit of your inventory. From this you can learn your inventory accuracy percentage. You can also see which SKUs are being pilfered, which leads to higher scrutiny, surveillance, or other ways to deter theft.

Employees Are the Key

Cycle counts are a great way for your employees to get involved with important operational functions. You can offer bonuses and other perks when they contribute to improving inventory accuracy. Getting them engaged with their work is a major benefit to your business and ensures the success of your new inventory process.

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