Docstoc

Cycle Counting Best Practice

Document Sample
Cycle Counting Best Practice Powered By Docstoc
					                 CYCLE COUNTING BEST PRACTICE
                              Courtesy of Bob Steele
                                    October 6, 2004

Introduction
Cycle counting is a crucial business discipline. It not only enables high-performance store
operations, but also has a significant impact on supply-chain operations:
    Accurate data is foundational to retailer-supplier cooperation and collaboration
           o On promotion, merchandising, & replenishment
           o For inventory optimization (core-inventory initiatives and vendor-
               managed, and –assisted inventory programs)
           o For better product development, improved order cycle times, reduced
               freight cost, less returns

What’s Cycle Counting?
Definitions:
    A systematic method of taking inventory continually through out the year
    A dynamic audit that allows for real-time inventory accuracy of merchandise.
    A method for auditing inventory accuracy and reconciling errors on a cyclical
       schedule rather than once a year.

Why Is It Important?
Improves data accuracy
    Cycle counting drives ordering, replenishment cycle times, category management
    Affects your store and the entire supply chain
    Is the basis for all decisions related to POS data analysis
Reduces human error
    Helps identify and correct receiving, shelving, selling, ordering errors
    Staff training is vital to ensure correct counts
Replaces annual inventory
Can Increase Sales with Reduced Inventory
    Real-time inventory accuracy means less out of stocks
    It also aids finding misplaced and lost stock
Can Increase Performance
    Improved inventory turns and GMROII because you can measure what’s in stock
      and moving
    Better customer service through higher in-stock rates
    Cycle counts and resulting accurate data increase productivity and efficiency, and
      lead to reduced operational and inventory-carry costs
A Continuous-Improvement Practice
      Cycle counting helps ensure accuracy is part of your store culture
      It optimizes business opportunities through data-driven knowledge
                 RECOMMENDED CYCLE COUNTING
                  BEST PRACTICE AND STRATEGY
1. COUNT ALL INVENTORY QUARTERLY IN A METHODICAL, DISCIPLINED
   MANNER.
      Recommended to count entire inventory four times annually:
          o An example of how to determine what needs to be counted how often:
                8,000 items in inventory / 250 (number of days in operation per
                  year) = 32 counts
                32 counts x 4 times per year = 128 products counted per day.
2. ASSIGN A CYCLE-COUNT TEAM LEADER
      Give one person responsibility and accountability for inventory-accuracy program
      Train staff on procedures, value of inventory accuracy, etc.
          o Include cycle counting and inventory accuracy priorities in new-employee
               orientation
3. DETERMINE IN ADVANCE YOUR COUNTING STRATEGY:
      Count by Physical Area or by Category
          o Use a systematic planned approach for either method.
                   Divide your store into physical areas, such as aisles, fixtures, shelf,
                      bin, etc., and organize a consistent counting pattern that ensures all
                      stock is counted within the specified time parameter.
                   By category means counting by product type, classification, genre,
                      etc.
          o Identify areas that can be counted within specified time constraints and
              ensure staff is appropriately assigned so count is conducted on schedule.
      Count your stock
          o Some retailers prefer to count after hours to expedite the process and avoid
              diluting customer service capabilities
          o Check your POS system for supporting reports and other capabilities that
              contribute to counting speed and accuracy, such as lists by category or
              location.
4. TRACK & INVESTIGATE DISCREPANCIES – EVALUATE FOR CONTINUOUS
IMPROVEMENT
      Identify problems, operational errors, sales/forecast errors, etc.
      Take corrective action based on findings
          o You may want to change store procedures, processes, etc. to ensure proper
               inventory control.
          o Use updated data for performance and sales analysis.

				
DOCUMENT INFO