The time for your company’s inventory count is approaching. You may be debating whether to do a cycle counting or an annual inventory count. Here are some things to consider to help you decide which is right for your business:
- How accurate does your inventory management need to be?
- How often do you need to count?
- How much time and money are you willing to invest in counting?
In general, a cycle count is more accurate than an annual inventory count because it counts smaller quantities of items more frequently. However, a cycle count requires more time and effort to maintain. If accuracy is your top priority, a cycle count is the better choice.
But, these few lines are not enough to show the comparison between cycle counting and annual inventory count. In this blog, we will explain to you the clear reasons why cycle counting is a better choice than annual inventory count. Read on further to know more about warehouse inventory management and the right choice between the two.
Top Reasons Why Cycle Counting is Better than Annual Inventory Counting
1. Cycle Counting is More Accurate than Annual Inventory Count
Accuracy is the main advantage of cycle counting over annual inventory counting. As cycle counting involves counting smaller quantities of items more frequently, it results in a more accurate inventory. This is especially important if your business needs to maintain a high level of accuracy for its inventory.
For example, if your company sells products that have a short shelf life, it is important to know exactly how many units you have in the stock inventory at all times. This way, you can avoid selling expired products and disappointing customers.
Similarly, if you sell products that are subject to recall, it is important to have an accurate inventory so you can remove all of the affected products from your shelves immediately.
2. It is Less Disruptive than Annual Inventory Count
Less disruptive means that it will have less impact on your business operations. Because cycle counting happens more frequently, that can spread out over time to have less impact on your business.
This is in contrast to an annual inventory count, which is typically done all at once and can disrupt your business operations for some time.
Let’s say, for example, that you own a retail store. If you do an annual inventory count, you have to close your store for a day or more while you count everything. This can cause lost sales and inconvenience your customers.
On the other hand, if you do a cycle count, you can count a few items each day and keep your store open. This will minimize the impact on your business and allow you to continue serving your customers.
3. It is Less Expensive than Anual Inventory Count
Expensive means that it will cost more. An annual inventory count requires you to pay for a lot of resources all at once, such as extra staff, rental space, and storage containers.
There is also the cost of disrupted operations, which can include lost sales and customers. In contrast, cycle counting can be done with your regular staff and doesn’t require extra resources. This makes cycle counting a more cost-effective option than annual inventory count.
For example, a company that sells products online might do a cycle count once a week. They can count the inventory while the warehouse is open and don’t need to pay for extra staff or storage space. This makes cycle counting a more cost-effective option than annual inventory count.
4. Cycle Counting Can be Done More Frequently than Annual Inventory Count
Companies can do annual inventory only once a year, but they can do cycle counting more frequently. This allows you to keep your inventory up-to-date and makes it easier to spot errors.
For example, let’s say you own a store that sells clothes. You might do a cycle count once a week to make sure that your inventory is accurate. This way, if a customer buys a shirt, you can immediately remove it from your inventory.
If you only did an annual inventory count, the shirt would remain in your inventory until the next year. This could lead to overstocking or selling out certain items.
Therefore, cycle counting is more accurate and can be done more frequently, making it a better option than an annual inventory count.
5. Cycle Counting Allows You to Focus on Specific Areas
When you do an annual inventory count, you have to count everything in your inventory. This can be time-consuming and difficult, especially if you have a large inventory.
With cycle counting, you can focus on specific areas. This allows you to count the items that are most important or are most likely to be inaccurate.
For example, you might want to focus on items that are selling quickly or have a short shelf life. This way, you can make sure that these items are always in the stock inventory and avoid overstocking or selling out.
6. It Can be Done Manually or with Technology
Annual inventory count typically requires you to count everything by hand. This can be time-consuming and error-prone. It sometimes requires you to rent storage space and hire extra staff.
With cycle counting, you can use technology to help you count your inventory. This can be done with barcodes, scanners, and software. It can make cycle counting more accurate and less time-consuming. You can use technologies like barcodes, RFID tags, or other methods to automatically keep track of your inventory.
For example, you can use a barcode scanner to scan the items in your inventory. The scanner can then automatically update your inventory records. This makes cycle counting more accurate and less time-consuming.
7. It Makes Way for Perpetual Inventory
Perpetual inventory is a system where your inventory is always up-to-date. It means you don’t need to do an annual inventory count.
With cycle counting, you can update your inventory records frequently. You can do it more often than the annual inventory count, and it doesn’t require extra resources. This makes it a more accurate and efficient way to track your inventory.
Perpetual inventory is especially important for businesses having a lot of inventory or selling products quickly. It can help you avoid overstocking or selling out certain items.
For example, if you own a store that sells clothes, you might want to switch to a perpetual inventory system. This way, you can keep track of your inventory daily. This would allow you to avoid overstocking or selling out certain items.
Cycle counting is a more accurate and efficient way to track your inventory than an annual inventory count. Companies can do it more frequently, and it doesn’t need extra resources. It also allows you to focus on specific areas. This makes it a better option for businesses that have a large inventory or sell products quickly.
All these factors make cycle counting a better option than the annual inventory count. We hope now you have got a clear understanding of the difference between the two methods.
So, what do you think now? Which method do you prefer- cycle counting or annual inventory count? Let us know in the comments below.