Inventory is an important ERP element
- An accurate inventory is a foundation of any ERP system.
- Inventory is an important element of any business and its supply chain.
- Planning, Purchases and Production also depend on accurate inventory.
- If the inventory is not properly managed, the business will suffer financially.
Physical Inventory Count
- Physically counting entire inventory
- Conducted Once/ twice a year
- During Non operating hours (shutdown period)
- Mainly done for Balance Sheet purposes
What is Cycle Count?
- Inventory auditing procedure under inventory management.
- A small subset of inventory, in a specific location, is counted on a specified day.
- No Shut Down (Can conduct during operating hours)
- Continuous Inventory adjustments
- If the count agrees to the ERP Cycle Count record, the inventory is considered as correct.
- If not, investigate the cause of the difference; post the adjustment, and record the reason for the difference.
Steps in Cycle Counting
Step 1: Checking Inventory
- Complete data entry on all inventory transactions, so the inventory database is fully updated.
- Print a cycle counting report, which states the bin locations that are to be counted, and assign it to the warehouse staff.
- The cycle counters compare the locations, descriptions, and quantities stated on the report with the shelf for variations.
- Alternatively, the descriptions and locations can be given to warehouse staff without quantity, so that they could enter counted quantity.
Step 2: Investigating Errors
- Investigate all differences found and discuss them with the warehouse manager, and determine whether there is a pattern of errors that may require further action
- Adjust the inventory record database to remove the error found by the cycle counter.
- If further action is required, alter procedures, training, staffing, or whatever else is needed to eliminate the error.
Benefits of Cycle Counting
- Accurate data and a full audit trail
- More accurate inventory records
- Problems and Discrepancies are more easily spotted and corrected.
- Examine the leading causes of differences and change your processes to eliminate those differences.
- Staff diligence – When staff understand inventory is accurately counted, they become more diligent in caring for your inventory.
- If the inventory records are not first updated with all outstanding inventory transactions, it is possible that a cycle counter will detect an error and adjust it.
- Cycle counts can introduce inventory errors if the cycle count process is poorly executed.
- This challenges can be mitigated by using ERP software like SAP Business One.
Features in ERP Software
- Built in functionality facilitate good inventory cycle counting
- Scheduling and work order capabilities makes easier to manage.
- Location tracking in the scheduling of cycle counts.
- Flexibility in adjusting discrepancies found.
- Advanced reporting and management dashboards conveying information.
Cycle Counting in SAP Business One
Cycle Count Recommendations
This function lets you view cycle count recommendations and launch inventory counting for the selected items.
Inventory Counting Transactions
Selecting Items to Count
Printing Out Lists of Inventory Counting Items
Recording Inventory Counting Results
Reconcile item quantities with the results of inventory counting