• Inventory Management  |  Warehouse Management  | 
  • 3 Min Read
  • The Hidden Costs of Manual Cycle Counting: Turn a Necessary Evil into a Value-Add with Mobility

    Dustin Caudell

    Written by Dustin Caudell
    Thu, Aug 08, 2019

    Cycle counting is often thought of as a 'necessary evil.' With automation and mobile inventory management, it doesn't have to be.
    Cycle counting is often thought of as a 'necessary evil.' With automation and mobile inventory management, it doesn't have to be.

    When it comes to cutting overhead costs and improving operational efficiencies, cycle counting is often the last thing warehouse managers think about. Because of this, the process tends to get forgotten or overlooked as an area for efficiency improvement, even though it continues to suck up time, labor and resources when performed manually.

    Meanwhile, outdated manual cycle count procedures continue, taking hours to complete with only subpar accuracy.

    But by automating cycle counting (and physical inventories), you can streamline counts, plug hidden spending leaks, and increase your team’s productivity without increasing your overhead costs.

    Cycle Counting: The Necessary Evil?

    A typical warehouse will conduct a blend of inventory auditing procedures, such as quarterly wall-to-wall physical counts, mini physical inventories, intermittent ABC analysis, daily high-dollar cycle counts, etc. – whatever fits your operation. Many of these methods can be referred to informally as “cycle counting.”

    No matter which method(s) you use to count inventory, you have to devote quite a bit of manpower to making sure that the stock levels listed in your system match what’s actually on the shelf. Not cycle counting regularly can create huge problems, delays and even loss of revenue.

    Just because you have to cycle count doesn’t mean you have to do it manually. In fact, automating your cycle count process can turn this necessary evil into a cost savings opportunity. The money you save from using a cycle counting mobile app can pay for an entire mobile inventory management solution in just one year.

    Learn More: 3 Ways to Accelerate Inventory Management »

    The Problem with Manual Cycle Counting

    Manual cycle counting requires dedicated labor, time and floor space. Whether you perform these counts annually, quarterly, monthly – even daily – each time you send your team out to count stock levels, you are taking up resources that could be used more effectively on other tasks.

    Meanwhile, the manual process holds your operation back through three areas of inefficiency:

    • It’s a slow process that drains cost and productivity.
    • It’s time consuming, taking up large chunks of workhours.
    • It delivers only subpar accuracy.

    To demonstrate how these points impacts your business, let’s walk through an example of where those cost and productivity leaks occur.

    How a manual cycle count might proceed:

    1. Worker receives cycle counting assignment for the week in the form a paper printout on a clipboard.
    2. Worker walks to the location where count will be conducted.
    3. Worker counts the items in each bin by hand based on the printout.
    4. Unable to find some of the items, the Worker walks around in search of where they actually are, eventually locating the items in a different location.
    5. Once completed, the Worker walks back to a central workstation to hand over the checklist.
    6. A clerk or warehouse manager then manually types the data into the computer.
    7. Because the handwriting is bad, some numbers are interpreted incorrectly, causing bad information to enter the database.

    In the end, the manual cycle count takes approximately 6 hours (2 seconds per item) at about 80% accuracy.

    After all this time and effort, the end result is still less than 100% accurate – even though the point of cycle counting is to improve inventory accuracy.

    If you aren't running a straightforward distribution center, inventory management becomes even more challenging. Maybe you have several types of inventory, such as raw material, finished goods, spare parts, equipment and tools (fixed assets). Your inventory management workflows may be far more complex, meaning cycle counting becomes more complicated, and thus takes up more time and budget to complete.

    A mobile app can automate cycle counting and physical inventory workflows for your workers, creating value through added productivity, accuracy and labor allocation.
    A mobile app can automate cycle counting and physical inventory workflows for your workers, creating value through added productivity, accuracy and labor allocation.

    Automating Manual Cycle Counting with Mobile Barcode Software

    You may have handled physical inventory and cycle counting by hand in the past, but that doesn’t mean it’s the best way to continue cycle counting in the future. Upgrading to automatic cycle counting using mobile devices like barcode scanners or handheld computers can significantly improve count speeds by condensing and simplifying the counting procedure, ultimately freeing up manpower to be re-allocated to more important revenue-generating tasks.

    Also Read: Enterprise-grade hardware for warehouse enterprise mobility »

    In this example, the worker will be using a mobile device with a cycle counting mobile app instead of a paper checklist:

    1. Worker receives cycle counting assignment for the week.
    2. Worker walks to the location where count will be conducted.
    3. Worker scans the barcode on the items and confirms the quantity, performing a validated transaction.
    4. Software on the mobile device updates the ERP database with that transaction in real time, with near-perfect accuracy.

    At the end of the day, this cycle count takes less than 2 hours (or 0.6 seconds per item) at 99.999% accuracy – a time savings of more than 70%.

    Automated cycle counting with mobility offers multiple benefits, including:

    • Lower labor costs
    • Greater worker productivity
    • Higher inventory accuracy
    • Stock levels can be relied on as ‘truthful’
    • Real-time inventory visibility
    • Trust in ERP or inventory database
    • Reduced indirect costs of data errors
    • Short ROI

    Don’t Stop at Cycle Counting: Automate with Mobility

    While the benefits of automating cycle counting are undisputed, you don’t have to end your digital warehouse automation efforts there. Cycle count and physical inventory mobile apps tend to come as part of a larger mobility suite, such as RFgen Mobile Foundations™, a total mobile data collection solution that provides similar efficiency-generating accelerators for other aspects of your supply chain operations as well.

    Using barcode software, mobile data collection software, and mobility, warehouses in virtually any industry can benefit from digital automation technology like automated cycle counting.

    Your warehouse could be next.

    Continue Reading: Warehousing 101: An Introduction to Warehouse Automation »

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