Cycle Counting

1. Cycle Counting @Vise Business Consultancy Author: Hans Groen

2. Need for counting inventory • Dislocated parts • Financial risks • Declined reliability of your Supply chain • Time waste in searching for stock • Excessive stock levels @Vise Business Consultancy - H. Groen

3. Risk during transactions • Receiving • Put away • Location transfer • Backflushing • QA transactions • Internal ‘loans’ • Unreliable scanning • behaviour staff @Vise Business Consultancy - H. Groen

4. Cost of lost inventory • Loss of actual booke value • Replacement of value + margin supplier • Required sale of both newly purchased as lost inventory • Loss of reliability = ‘No’ sell or downtime in factory • Additional cost in supply chain • Cost are mostly hidden but high @Vise Business Consultancy - H. Groen

5. Types of counting • Interval counting • End of year count. • Unreliable, long interval, no active control • Requires mostly shutdowns. • Costly • Cycle counting • Geographical • Ranking. • Multi moment method @Vise Business Consultancy - H. Groen

6. Geographic counting. • Map your warehouse and all racks • Determine max period to cover entire DC. • Divide by sequential regions in your DC • Count Region A up to Region Z. • Monitor all variances and explain them • Take corrective actions on variances • Allows to count all at least 4 times a year @Vise Business Consultancy - H. Groen

7. Sample Geographic method @Vise Business Consultancy - H. Groen

8. Ranking method • Divide your inventory ABC method: • A: 80% value. 6 times a year • B: 15% value. 3 times a year • C: 4% value. Twice a year • D: 1% value. Once a year @Vise Business Consultancy - H. Groen

9. Ranking method • Possibility to take into account: • Loose parts or bulk • Hig volume low value • Size of articles • Warehouse or WIP stock • Manual count or scanning solutions • Regular inventory or returns @Vise Business Consultancy - H. Groen

10. Ranking method • Pro’s • Statistical reliability • accepted by Accountants • Quick method, low impact on resources • Frequency upholds training and awareness among staff • Con’s • Not ideal to find lost material @Vise Business Consultancy - H. Groen

11. Ranking method • Best time is at beginning of day / shift or at the end. • Make sure system is updated and no ongoing transaction on area or material that is counted. @Vise Business Consultancy - H. Groen

12. Sample Ranking method @Vise Business Consultancy - H. Groen

13. Multi moment method • Determine the required number of counts based on relative share of total inventory • Utilisation of statistical approach • Based on required reliability • Tolerance or error level @Vise Business Consultancy - H. Groen

14. Multi moment method • Base of calculation • Determine share of each element of total • Required reliability • Tolerance @Vise Business Consultancy - H. Groen

15. Multi moment method • Base of calculation • Nv = required number of counts • P = share of each article • Up = reliability [1,96 = 95%] • A = tolerance [1,2%] • M = 20 working days • I = inventory level • Nv = SQR[Up]*p(100-p)/SQR(a) @Vise Business Consultancy - H. Groen

16. Multi moment method • Nv = SQR[Up]*p(100-p)/SQR(a) • 11,05=SQR[1,96]*55,34(100-55,34)/SQR(1,2%) • M[11,05] = Nv[703]/1274* 20 days @Vise Business Consultancy - H. Groen

17. Sample report @Vise Business Consultancy - H. Groen

18. @Vise Business Consultancy A privately owned company that since it inception in 2001 successfully completed major consultancy and interim projects in industries such as Food, Automotive, Technology, Aerospace and Healtcare. • Services • Interim management • Management consultancy • Training – Coaching • Benchmarks • Expertise • Supply Chain Management • Organizational development • Bottom-line improvements • Lean Manufacturering H. Groen - @Vise Business Consultancy