How the cycle count process unlocks WMS potential

“Improved inventory accuracy” is prominent on almost every WMS benefit list.  Without question, inventory control and cycle counting improvements translate into hard dollar paybacks that drop to the bottom line.  Without the expectation of highly accurate inventories, inventory losses can never be investigated and eliminated.  

With inaccurate inventories, demand planners start adding in a “just in case” fudge factor that drives up current asset investment.  With inaccurate inventories, people simply make bad decisions.  They either promise customer deliveries on quantities that don’t exist, or they request replenishment of quantities that already exist in sufficient amounts.

"every other benefit from WMS is predicated on accurate inventory counts"

What is it about WMS that results in better inventory accuracy? At first glance, it could appear to be a hollow claim. There is nothing particularly revolutionary that has happened in the software industry that changes the game on recording what quantities are received, what quantities are shipped, and where quantities are located.  Inventory accuracy almost always does get better with a WMS, though, simply because every other benefit from WMS is predicated on accurate inventory counts.

Skilled cycle counting

The key to sustained and significant inventory accuracy improvements is to become skilled at cycle counting. “Skilled cycle counting” means more than just adjusting WMS inventories when they do not agree with the physical count.  Skilled cycle counting requires documenting discrepancies.  Follow up includes investigation and implementing corrective actions to the process.  Process improvements from a small sample can then be applied to the whole through process standardization. Through systematic process improvement, discrepancies become fewer, and the frequency of required cycle counts diminishes. 

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Unfortunately, too many organizations cycle count, but never become skilled at it.  When that happens, the cycle count process is seen as an end into itself, rather than a process improvement tool. When improved inventory control is required, the only lever is to increase the frequency of cycle counting.   In this scenario, inventory control is not actually improving at all; inventory correction is simply occurring at an increased velocity. Inventory losses are not reduced; they are booked in smaller increments more frequently.

Transactional discipline matters

The practical math is that it doesn’t take significantly more resources to operate an inventory control system with an active process improvement effort than it does to cycle count more frequently.  Often, something as basic as scheduling a weekly meeting to review the three largest cycle count variances can yield disproportionate benefits. As people understand that transactional discipline matters, no one wants to be the person in the meeting explaining who didn’t do their job.

Inventory control is conceptually simple.  Report what goes in, report what goes out, and the difference remains.  The real world is anything but simple.  Inaccurate quantities can be received, products can change identities within the warehouse, finished goods can be returned to WIP, and shipped products can be returned to the warehouse.  

The central premise remains.  To attain the full payback from your WMS, good inventory control is a requirement, and cycle counting is the tool that helps achieve it.