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Initial Phase of Cycle Counting

Prior to initiating a full scale cycle counting program, a small sample of items should be selected which can be cycle counted repetitively as part of the daily activities of store­keepers. The objective is to select a small sample which will detect the causes of errors.

Select some purchased items, some manufactured items, some similar in appearance, some small and numerous but difficult to count and some which experience a changing unit of measure from ordering through receipt into stock. After counting these items, verify that the inventory record is correct. Then reconcile and adjust the records.

Count the same item at some interval short enough to insure that only a few transactions need to be studied and that only recent history needs to be investigated to detect the causes of errors.

When the sample test group can be maintained essentially error free, expand the program into a regular full scale cycle counting operation.

During the initial phase of cycle counting problem areas can be identified by answers to the following questions:

• Is storage space adequate?
• Are items stored in an orderly manner to facilitate counting?
• Are items properly identified?
• Is access to storage area limited to authorized personnel?
• Is there an effective storage plan?
• Is there a locator system and is it operating effectively?
• Is obsolete, scrap, and inventory pending quality con­trol disposition segregated from "good" inventory?
• Is the system for reporting daily inventory transac­tions effective?
• Is responsibility for reporting inventory transactions clearly defined?
• Are inventory classifications compatible with the fi­nancial accounting system?

To be Continued