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Improve the Process, Don't Inspect Quality In

Cycle counting is really a form of inspection. We all know you can't inspect quality into products. We shouldn't accept inspecting quality into the data. It's one more type of non-value-added activity. Work to eliminate all cycle counting at the same time as you are assured of accurate information.

The key is to improve the process so it only provides accurate data. This is not easy, for sure, but we can make huge strides with this focus.

• Use a predetermined container size for every part. Demand that production or vendor quantities exactly fill the bin with a standard quantity, plus or minus zero tolerance.
• Establish a Kanban (pull) system that controls the number of bins of a part in the company.
• Inventory balances can now be calculated for every part, if needed. No counting is necessary. The process controls the quantity to a preset limit with very little tolerance.
• Let the system self-audit itself.

Major Benefits of Cycle Counting

The greatest advantage of cycle counting is its effectiveness in the timely detection of errors and in maintaining high record accuracy. Since the last perpetual inventory record balance can be used as the audited inventory quantity at any point in time, cycle counting eliminates the undesir­able conditions normally associated with an annual physi­cal inventory.

• Improved customer service.
• Fewer stockouts.
• Increased production efficiency.
• Lower investment in safety stocks.
• Better cost control.
• Timely detection and correction of conditions causing inventory errors.
• Complete or partial elimination of the loss of produc­tive time. No need to shut down operations for physical inventory.
• Development of specialists who become efficient in obtaining good counts, reconciling differences and finding solutions to system errors.
• Fewer mistakes in item identification.
• Concentration of efforts in problem areas.
• High level of inventory accuracy through constant surveillance.
• No requirement for staging of items to determine availability or shortages.
• Valid data for inventory replenishment system.
• Less obsolete inventory.
• Less excess inventory.
• Reduced year-end inventory write-offs.
• Correct statement of assets throughout the year.

The optimum combination of a sound inventory system and cycle counting can provide reliable inventory data on a timely basis and at minimum cost. This contributes to better decision making and greater profitability.