Five Benefits of Cycle Counting Over Annual Inventory Counts
Stitch Labs is an operations and inventory control platform for high-growth brands.
As a business owner for a high-growth brand, you barely have time to interact with customer let alone spend an entire day counting inventory and checking for inaccuracies.
There are advantages and disadvantages of cycle counting, depending on how big your brand is. Although tools like Stitch can help you manage your inventory, in order to fully take advantage of our tools, you must implement systems in-house that account for physical stock counting and inventory control.
Online systems can manage quite a bit, but it’s helpful to set aside time for manual counting.
What is a cycle counting?
Cycle counting is an inventory auditing process that occurs continuously throughout the year, allowing you to only focusing on a subset of inventory. Cycle counts are less disruptive to daily operations, provide an ongoing measure of inventory accuracy and procedure execution, and can be tailored to focus on items with higher value, higher movement volume, or that are critical to business processes.
Five Advantages of cycle counting over annual counting
One thing that a lot of product-based businesses will do is ditch the annual inventory count and opt for something a little less taxing – ongoing cycle counts.
- Increase confidence in buying decisions
When you implement ongoing cycle counts, you’re forced to continuously assess your inventory. By having smaller check-ins, focusing on a subset of inventory, your buying decisions are more informed and targeted. You’re able to avoid stock-outs ahead of time and create a better report for buyers on your team.
The benefit of cycle counting can play an integral role in deciphering which items to order more of. There are a number of different cycle counting methods and one cycle counting example that works well for brands who want to maximize time is splitting inventory into three groups:
- A-Items are best-sellers that are counted most frequently throughout the year. These items typically move quickly, and therefore don’t spend much time sitting in your warehouse.
- B-Items are counted several times throughout the year, but not as frequently as A-Items. These products sell fairly regularly but because they sit in the warehouse longer, cost you more to hold.
- C-Items are only counted one or two times throughout the year, and consist of the majority of inventory cost. Since they are slower sellers, they are held longest in your warehouse, costing you the most.
- Lessen discrepancies
By shortening the amount of time between counts, you are decreasing the amount of time an error could have been made.
If you account for inventory incorrectly, waiting several months may cause a large issue with your customers and your business as a whole. Catch mistakes faster by these smaller, ongoing counts. This will help your brand decipher when to send in purchase orders, and keep your team running smoothly.
- Limit the amount of disruption within your warehouse
Keep cycle counts as a part of your weekly routine to prevent major disruptions to your warehouse. When businesses conduct full-day annual inventory counts, the entire warehouse must be paused in order to finish the job.
With cycle counting, you will evaluate inventory accuracy on an ongoing basis, allowing for minimal disruption and continuous communication among your team.
- Maintain focus and keep inventory as a priority
Inventory can often be the most frustrating part of owning a product-based business. Implementing smaller cycle counts allows your entire operations team to see your stock accuracy as a vital part of your business, allowing them to feel more confident about the business decisions you’re making. It will also decrease the amount of stress it causes, allowing for it to be accomplished with minimal haste.
- Increase accuracy
The purpose of cycle counting is to have an accurate reflection of inventory throughout the year. If, and if your brand is manually counting, chances are it’s not accurate if you’re counting annually. By counting inventory in smaller chunks, your brand is able to more easily keep track of numbers more accurately, so your retail reporting and inventory accounting information remain accurate by year’s end.
The disadvantages of cycle counting when scaling
As your brand scales, is it worth it for you to shut down your entire business just to count inventory?
Calling your employees together to figure out how much inventory you have on hand is not scalable. The number of employees within your company will grow as you do, and manual tasks increase error, while spreadsheets limit the number of users per workbook.
As your brand scales, the benefits of manual cycle counting certainly decreases, but having a centralized hub with your technologies incorporated into it will provide your brand with automated and updated inventory counts every few minutes across all sales channels when needed.
With automated inventory tracking and reporting, you’ll save hours of manual data entry, and manual cycle counting. Automated inventory management software and reporting helps you save time and enables you to make smarter business decisions.
As you reach a certain amount of growth, your business can plateau if you’re constantly manually adjusting inventory: give your brand the update it deserves!