Background

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.

Challenges

• 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

Process available

• 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