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Why Choose Cycle Count Inventory Auditing Over an Annual Inventory Count?

Posted by Edward Blackburn on Fri, Feb 15, 2019 @ 10:02 AM

Do you spend days tallying parts during an annual inventory count? Are you shutting down your shop floor for days just to get decent counts? If so, there's an alternative inventory management method that will eliminate the need to shut down production and also deliver better results.Woman working in a manufacturing warehouse counting components

This alternative method is known as cycle counting, and whether you’re a global manufacturer or a privately held company, you may stand to benefit from it. In fact, at RBB we've experienced numerous benefits since we've started to cycle count inventory. Most Importantly, cycle count allows RBB to provide more reliable scheduling and delivery to our clients.

Annual Inventory Counts Vs. Cycle Count Inventory Auditing

While conducting an annual physical inventory count is a common approach companies use to assess inventory levels following the completion of a full manufacturing year, it doesn’t always produce accurate results. This is because most companies will bring in temps or other personnel who aren't inventory-savvy to conduct annual counts. Even though this practice may seem efficient, it leaves room for error. Additionally, an annual inventory count will likely shut down your entire operation for however long it takes to complete. 

By implementing cycle count inventory management — which is the process of counting smaller subsets of inventory more regularly throughout the year — you're counting your inventory daily instead of annually, which means you’re able to isolate issues and catch and fix errors immediately. Since consistent inventory cycle counts help with accuracy, you'll be able to place more trust in your recorded inventory levels.

Cost Considerations

The cost of switching from annual inventory counts to frequent cycle count inventory auditing is often a concern for companies. However, switching to a cycle count process doesn’t mean you'll need to employ a full-time cycle counter. Depending on your inventory levels and your company’s goals, having one or two employees on staff with cycle count expertise may be sufficient.

If conducting annual counts still seems less expensive than hiring a full-time cycle counter or allocating daily inventory counts to your existing personnel, you may want to ask yourself the following questions:

  • How much does three to five days of counting cost in hourly labor? Also, how many employees are involved in these annual counts?
  • How many mistakes typically need to be fixed immediately following them?
  • How much product isn't produced during the three to five days your facility is shut down to conduct each annual inventory count?
  • What's the cost of having your operations shut down for three to five days?
  • How many clients are typically inconvenienced?

Cycle Count Inventory Auditing Can Change How Your Business Operates

While cycle count inventory auditing may not be the answer for all companies, you should at least weigh its pros and cons.  If your current inventory auditing process isn’t working, you might be surprised at how incorporating cycle count can combine with small batch manufacturing to change the way your business operates. Contact us to learn more.

Topics: Small Batch Electronics, Contract Manufacturing, Original Equipment Manufacturing

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