Cycle Counting

@Vise Business Consultancy

Author: Hans Groen

Need for counting inventory

Dislocated parts Financial risks Declined reliability of your Supply chain Time waste in searching for stock Excessive stock levels

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@Vise Business Consultancy - H. Groen

Risk during transactions

Receiving Put away Location transfer Backflushing QA transactions Internal loans Unreliable scanning behaviour staff
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Cost of lost inventory

Loss of actual booke value Replacement of value + margin supplier Required sale of both newly purchased as lost inventory Loss of reliability = No sell or downtime in factory Additional cost in supply chain Cost are mostly hidden but high
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Types of counting
Interval counting
End of year count.
Unreliable, long interval, no active control Requires mostly shutdowns. Costly

Cycle counting
Geographical Ranking.

Multi moment method

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Geographic counting.
Map your warehouse and all racks Determine max period to cover entire DC. Divide by sequential regions in your DC Count Region A up to Region Z. Monitor all variances and explain them Take corrective actions on variances Allows to count all at least 4 times a year
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Sample Geographic method

day 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 start # 0 17 33 49 65 81 97 113 129 145 161 177 193 209 225 241 257 273 end # 16 32 48 64 80 96 112 128 144 160 176 192 208 224 240 256 272 288 day 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 start # end # 1009 1024 1025 1040 1041 1056 1057 1072 1073 1088 1089 1104 1105 1120 1121 1136 1137 1152 1153 1168 1169 1184 1185 1200 1201 1216 1217 1232 1233 1248 1249 1264 1265 1280 1281 1296 day start # end # 127 2017 2032 128 2033 2048 129 2049 2064 130 2065 2080 131 2081 2096 132 2097 2112 133 2113 2128 134 2129 2144 135 2145 2160 136 2161 2176 137 2177 2192 138 2193 2208 139 2209 2224 140 2225 2240 141 2241 2256 142 2257 2272 143 2273 2288 144 2289 2304 day start # end # 190 3025 3040 191 3041 3056 192 3057 3072 193 3073 3088 194 3089 3104 195 3105 3120 196 3121 3136 197 3137 3152 198 3153 3168 199 3169 3184 200 3185 3200 201 3201 3216 202 3217 3232 203 3233 3248 204 3249 3264 205 3265 3280 206 3281 3296 207 3297 3312

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Ranking method
Divide your inventory ABC method:
A: 80% value. 6 times a year B: 15% value. 3 times a year C: 4% value. Twice a year D: 1% value. Once a year

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Ranking method
Possibility to take into account:
Loose parts or bulk Hig volume low value Size of articles Warehouse or WIP stock Manual count or scanning solutions Regular inventory or returns

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Ranking method
Pros
Statistical reliability accepted by Accountants Quick method, low impact on resources Frequency upholds training and awareness among staff

Cons
Not ideal to find lost material
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Ranking method
Best time is at beginning of day / shift or at the end. Make sure system is updated and no ongoing transaction on area or material that is counted.

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Sample Ranking method

Week # 1 1 100 101 102 103 104 105 106 107 108 109 110 111 111 400 402 403 404 405 406 407 408 409 410 411 412 413 800 801 802 803 804 805 806 807 2 112 113 114 115 116 117 118 119 120 121 122 123 124 414 415 416 417 418 419 420 421 422 423 424 425 426 808 809 810 811 812 813 814 815 3 125 126 127 128 129 130 131 132 133 134 135 136 137 427 428 429 430 431 432 433 434 435 436 437 438 439 816 817 818 819 820 821 822 823 4 138 139 140 141 142 143 144 145 146 147 148 149 150 440 441 442 443 444 445 446 447 448 449 450 451 452 824 825 826 827 828 829 830 831

Example: A articles every two weeks. 100 articles B articles every month. 200 articles C articles. Quarterly. 400 articles By week, 4 days are used to count. One day is used to clean up. A: every two weeks, 8 days availabe. 100 art / 8 days = 13 pro day B: every month. 16 days available. 200 art / 16 = 13 pro day C: every Quarter. 52 days available. 400 arts / 52 = 8 pro day This means 13+13+8 = 34 articles pro day After one Quarter: A: 6 times counted = 24 times a year B: 3 times counted = 12 times a year C: one time counted = 4 times a year

Type article A A A A A A A A A A A A A B B B B B B B B B B B B B C C C C C C C C

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Multi moment method

Determine the required number of counts based on relative share of total inventory Utilisation of statistical approach
Based on required reliability Tolerance or error level

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Multi moment method

Base of calculation
Determine share of each element of total Required reliability Tolerance

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Multi moment method

Base of calculation
Nv = required number of counts P = share of each article Up = reliability [1,96 = 95%] A = tolerance [1,2%] M = 20 working days I = inventory level
Nv = SQR[Up]*p(100-p)/SQR(a)
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Multi moment method

p art # 1 2 3 4 5 6 7 8 9 10 11 12
description a b c d e f g h i j k l

Share
55,34% 5,23% 0,90% 1,24% 11,91% 1,99% 3,26% 0,00% 14,25% 4,32% 0,96% 0,59%

Nv m I required counts Nv monthly counts inventory level 703 67 11 16 152 25 42 0 182 55 12 8 1.274 11,05 1,05 0,18 0,25 2,39 0,40 0,65 0,00 2,86 0,87 0,19 0,12 20 24.619 2.328 400 551 5.298 885 1.450 2 6.340 1.921 427 264 44.485

Nv = SQR[Up]*p(100-p)/SQR(a) 11,05=SQR[1,96]*55,34(100-55,34)/SQR(1,2%) M[11,05] = Nv[703]/1274* 20 days

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Sample report
Cycle count root cause report
Date Owner Date count # art counted Category 3-mrt 120 A 4-mrt 110 B 5-mrt 115 C 6-mrt 125 A 7-mrt 120 B Totalen 590 # with variance 20 12 30 21 15 98 17% # outside tolerance % with error location 10 8,33% 2 6 5,45% 1 4 3,48% 12 9,60% 2 6 5,00% 1 38 6% 6,00 16% fout reden missed docsfalse UOM Lagtime 1 3 1 2 1 1 2 2 8 7 1 1 13,00 34% 12,00 32% 5,00 13% wrong code others 2 1 2 1 1 1 6,00 2,00 16% 5%

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@Vise Business Consultancy

A privately owned company that since it inception in 2001 successfully completed major consultancy and interim projects in industries such as Food, Automotive, Technology, Aerospace and Healtcare.
Services
Interim management Management consultancy Training Coaching Benchmarks

Expertise
Supply Chain Management Organizational development Bottom-line improvements Lean Manufacturering

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