We all have a general understanding of how inventory counting works, but do we really know the best practices and why they are so important? This presentation discusses that further

1. Inventory Cycle
Counting 101
Best Practices & Benefits

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3. Our Disscusion • What Is Cycle Counting?
• Physical Inventory vs. Cycle Counting
• How to perform cycle counting?
• Inventory Accuracy in Cycle Counting
• Inventory Cycle Count Policy
• The Cycle of Cycle Counting
• What are the Methods of Cycle Counting?
• The Frequency of Cycle Counting Methods
• Inventory Cycle Counting Benefits
• How to Increase Accuracy in Cycle
Counting?
• More ways to sharpen accuracy
• Inventory Cycle Counting Best Practices
• How can Automation help in Cycle
Counting?
• How NetSuite Helps with Inventory Cycle
Counting?
• Understanding NetSuite
• Contact Us

4. What Is Cycle Counting?
Cycle counting is a method of
checks and balances by which
companies confirm physical
inventory counts match their
inventory records. This method
involves performing a regular count
and recording the adjustment of
specific products. Over time, they
have counted all their goods.

5. Physical Inventory vs.
Cycle Counting
• A physical inventory counts
all stock one time a year.
• Cycle counting counts small,
preselected sections of
inventory multiple times a
year, sometimes as often as
daily.

6. 2. Establish a strategy if
not using bins
• If you have a warehouse
with no bins (or only a
couple of bins),
• You need to try to get items
moved all in one physical
location - or as close
together as possible.
• In a store that cross-
merchandises items,
knowing all the locations in
the store where this item is
located will be critical,
especially when trying to
reconcile the count.
Physical Inventory Counts
1. Get a head start on
Overstock items
• If you are in a warehouse or a
store, you probably have
overstock that won’t be used
until after inventory is taken.
• You can get a head start on
counting by identifying what is
in these boxes and making
sure they are supposed to be
counted.
• If they are not, mark these
item/boxes clearly with “Do
Not Count” so there are no
questions on inventory day.
3. A little bit of
organization goes a
long way
• Two of the most
overlooked
preparations are
having a clean cutoff
of which items have
not been received or
shipped from NetSuite,
and clearly marking
these as “Do Not
Count.”

7. Cycle Counting
• IKEA is a great example
of a business that uses
both a sophisticated
inventory management
system and sporadic
cycle counts to optimize
inventory.

8. • Count one category at a time – Ideally, you want to be
able to cycle through your entire inventory on a period
basis. It’s best to focus on one category at a time so
you can count efficiently during business hours and not
be impeded by operational downtime.
• Choose count categories based on seasonality – The
aim of inventory counting is to be able to rectify any
disparities in inventory as and when they happen. It’s
best to count products when they’re at their peak to
ensure you can fix any issues immediately.
• Mix up your cycle count schedule – It’s an unfortunate
reality that inventory shrinkage is sometimes due to
staff theft, so aim to vary your schedule to deter
employees from “gaming the system.”

9. How to perform Cycle Counting?
You can perform cycle counting by
scheduling high frequency, regular
counts of sections, or bays as part
of everyday operations. Use
inventory cycle counting methods
to do counts daily and assign
specific workers for particular
areas.

10. Number of
SKUs
Available Counting
Resources
Counting Frequency
Determine how many
products, or stock-
keeping units, you
want to count at a
time.
This resource is
dependent on the
number of available
employees and how
much time they can
dedicate to counting
stock
How often you
count inventory
depends on how
many SKUs you
want to cycle count
in the year

11. Inventory Accuracy
in Cycle Counting
When used as a metric,
inventory accuracy is either a
count or a cost. Determine
inventory record accuracy (IRA)
by using the inventory cycle
count accuracy formula.
IRA = Matched inventory / #
items counted

12. • The goal of cycle counting is to
identify and rectify any inventory
record discrepancies.
• As with any process, it is helpful to
understand your performance, if it is
improving, and how you perform
compared to industry benchmarks. A
common KPI for this is the IRA
number. You can adapt this formula
for either the number of units or a
dollar total.
• For dollars/units, use the formula:
IRA = [ 1-the sum of the absolute
variance / # the sum of the total
inventory ] x 100

13. Inventory Cycle
Count Policy
An inventory cycle counting
policy specifies when to
perform counts periodically
to confirm the inventory
balances. Companies should
also determine whether they
will count products randomly
or in a set pattern and
whether they will have
occasional “special” audits.

14. The Cycle of Cycle Counting
Companies start inventory cycle
counting to eliminate the root
causes of errors. This action
leads to reliable control
processes. After completing a
full physical inventory to correct
any stock discrepancies, the
company institutes a regular
counting program for
maintenance.

15. • Review Records- You want to start with
an accurate database. Begin the process
by reviewing and correcting the data
entry on all the inventory transactions.
• Print or Upload a Cycle Count- Report
Create a cycle count report. If you are
using a mobile device to do the count,
upload the report to it.
• Begin the Count Counters- should review
the inventory locations, descriptions, and
quantities from the report and compare it
to what is physically on the shelf.

16. • Investigate and Reconcile- Identify any
differences found during the count and
reconcile them with the stock manager.
Look for patterns of errors.
• Alter Procedures- Implement any
inventory counting policies or
procedures, if necessary.
• Adjust Records- Make changes in the
inventory record database to reflect
what is on the shelf.
• Calculate and Repeat- Audit inventory
regularly and calculate the inventory
accuracy percentage.

17. What are the Methods of Cycle Counting?
This process
counts items in
inventory that
you use the
most.
Control
Group
The process usually focuses
on a small group of items
that are counted many times
in a short period and reveals
any errors in the count
technique (which can then
be corrected).
Opportunity-
based
These can be exception-
based cycle counts, such
as when the stock goes
below its predetermined
threshold, or when short-
picks occur.

18. Random Sample
Objective
Counting by
Surface Area
Irrespective of stock value,
you will parse the storage
area into smaller audit
areas.
You can perform the
count daily to account for
a large percentage of the
items in the warehouse in
a reasonable period.
Hybrid
They can base their
hybrid approach on its
warehouse map, or a
combination of location,
value and throughput.
Continued

19. The Frequency of Cycle Counting Methods
• ABC Analysis (Pareto)
• Count "A" items most frequently,
followed by "B" items, and then
count "C" items the least often.
Assume that the number of counts
will decrease over time as the
inventory records get more
accurate. You will still maintain the
proportion of counts between A, B,
and C items.
• Start with the ABC method when
you need a customizable program
that gives extra attention to
essential products.

20. • Control Group
• Perform this count
several times over a
short period.
• Use a control group
when you want to find
process errors.
• Opportunity-based
• Use to count items at
crucial points in the
inventory management
process, such as after every
ten transactions of a
specific item.
• Use to count items at
crucial points in the
inventory management
process, such as after every
ten transactions of a
specific item. OR Use this
method as a different, time-
saving way to check your
process' accuracy.
• Random Sample
• Use to count items at
crucial points in the
inventory
management
process, such as after
every ten transactions
of a specific item.
• Use this method when
you stock many
similar items.

21. • Objective Counting by
Surface Area
• How often you count is
based on company goals,
but you should to it at least
once per year for each
area.
• To ensure storage locations
are accurate. It can also
help you find any patterns
of stock discrepancy based
on site.
• Hybrid
• Counting
frequency
depends on
which methods
you set up.
• Your company
needs a more
flexible method
of counting.
• Cycle Counting by Usage
Only
• Count the highest used
items most often and
then less frequently for
the other items.
• Use this method when
you have adequate
controls for high-value
items and need more.

22. • A more efficient operation overall.
• Possible elimination of annual counts.
• Improvement of the closing process.
• Decreased audit fees.
• No employee overtime costs.
• Detect thefts in a timelier manner.
• Higher order fulfillment rates.
• Better customer service levels.
• More accurate inventory assessments.
• Higher sales.
• More time between physical counts.
• Fewer errors.
• Less inventory write-offs and obsolescent
inventory.
Inventory Cycle Counting Benefits

23. How to Increase Accuracy in Cycle Counting?
• Improve accuracy by
using a methodological
approach that accounts
for any unique business
needs and human
involvement.
• Make sure teams do the work at a
time that makes sense for the
business.
• Some businesses prefer to count at
the beginning of the day, citing fresh
staff.
• Other organizations say the end of
the day is better because it does not
take away from the staff’s routine
jobs.
• Some organizations use a warehouse
management system to assign
counting by station, so staff never
have to leave their station to perform
their counts

24. • In the case of variance, recount the
items at the line level.
• Coordinate the reordering, picking
and putting away of items after
counting them.
• During active counting, freeze any
activity on the items and their
locations.
• Randomly alternate the counting
staff.
More ways to sharpen accuracy

25. Inventory Cycle
Counting Best Practices

26. • Close all transactions for inventory
items before the cycle count.
• If using the ABC method, classify
items into the respective counting
groups using specified, documented
processes.
• Count all products for all SKUs listed.
• Decide what to count when.
• Use the inventory accuracy formula
to see changes over time.
• Identify the fastest moving items in
the warehouse.

27. • Dedicate specific personnel to
counting teams.
• Ensure teams count all products at
least once quarterly.
• A supervisor can check the counts
against the inventory in the
system.
• Perform investigations when errors
crop up.
• Document everything: the process,
the changes and the results.

28. How can
Automation help in
Cycle Counting?
Thanks to technology, the cycle
counting process has become easier,
less intrusive and requires even less
manpower. By replacing Excel
spreadsheets or other manual
inventory control systems with
inventory control software, companies
can more efficiently track their stock—
all while reducing human error and
saving time, money and valuable man-
hours.

29. • Use software to implement an
inventory control system (part
of warehouse management
system).
• Devices include mobile
computers, robot counters,
and barcode scanners.
• Software can select the
number of items and
locations to count at a
specific time.

30. How NetSuite Helps with Inventory Cycle Counting?
• NetSuite’s Inventory Count
feature improves inventory
tracking and provides
increased control over key
assets.
• With this feature, firms can
categorize inventory based on
the volume of transactions
and/or value, and enter
regular periodic counts of on-
hand item quantities to
maintain inventory accuracy.

31. • With its standard functionality, NetSuite
not only helps you gain better control
of your inventory.
• With the mobile app, users can scan
bins and items, automatically
recording the cycle counts without
leaving the floor.
• This makes auditing inventory less
intrusive to daily work and reduces
manual errors due to incorrect keying
and lag time.

32. Understanding
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Encompassing ERP/Financials, CRM and ecommerce for
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