How to Perform Inventory Counting?

Inventory counting is the process of systematically tracking and verifying the quantities of products or materials on hand within a business. With the start of the new year upon us what better time than now to start thinking about inventory?. Year-end inventories can be a thing of the past if you incorporate cycle counts into your operation. Utilizing the tools we provide at retailcloud you can have more accurate records year-round instead of waiting until the end of the year to do the typical tedious full year-end inventory. With a multitude of backend reporting,  innovative and completely free inventory management apps we will help you through the process. Whether it’s running analytics on nGauge or utilizing mInventory for all of their inventory needs, we got you covered. Users can use our apps to scan inventory for your cycle counts using the camera on your phone and complete inventory adjustments all from the palm of your hand. 

What is Inventory Counting?

An inventory count, also referred to as a stocktake or physical inventory, is the process of manually verifying and counting the items or materials a business holds in its inventory at a particular point in time. This procedure is carried out to confirm that the actual stock matches the recorded inventory levels and to detect any discrepancies.

Performing an inventory count allows businesses to evaluate their stock levels, identify any problems like overstocking, understocking, or inventory shrinkage, and uncover potential weaknesses in their inventory management system, ultimately helping to improve operational efficiency.

There are four main types of inventory counts, each serving a specific purpose to ensure accurate tracking of stock levels:

1. Periodic Inventory Count: This method involves counting the entire inventory at regular intervals, such as annually, quarterly, or monthly. It is commonly used by smaller businesses that do not have the resources for continuous tracking. After each count, inventory records are updated based on the physical count.

2. Perpetual Inventory Count: This system involves continuous tracking of inventory in real-time using technology like barcode scanners or RFID. As goods are sold or received, the inventory count is automatically updated. It provides a more accurate and up-to-date view of stock levels, making it ideal for businesses with high turnover or large inventories.

3. Cycle Count: A cycle count involves counting a portion of the inventory on a regular basis rather than all items at once. This method allows businesses to keep inventory levels accurate without disrupting operations. The items are counted in cycles, often on a rotating schedule, ensuring that every item is counted periodically throughout the year.

4. Spot Inventory Count: This is an ad-hoc count where specific items or categories are counted randomly or in response to a particular issue, such as suspected theft or discrepancies in inventory. It is usually a targeted approach used to verify specific parts of inventory rather than a full count.

Each of these methods offers a different approach to inventory management, and businesses choose the type that best suits their needs and resources.

Benefits of cycle counting

There are many benefits that come along with cycle counting as opposed to doing the full end of the year inventory including:

• Smaller subsets of counts, less time to spend counting. In the retail world, time is money
• Accurate reflections of inventory throughout the year
• By counting more often you find discrepancies quicker
• No need to shut down your warehouse operation for long periods of time
• Use the ABC method to focus on your higher value items

What is the ABC analysis method?

ABC analysis is an inventory categorization technique, that divides an inventory into three categories. These categories will be cycle counted throughout the year based on the rules set by ABC. Putting your focus on the higher valued items first. 

• A-Items: Items that are high velocity, high value or items that tend to have inventory inaccuracy. These items are typically counted monthly/quarterly. These items will be roughly 80 percent of your velocity which is about 20 percent of your inventory. 
• B-Items: Items that turnover regularly but may cost more than A-items. These items are typically counted a few times a year. They will consist of the next 30 percent of your inventory that make roughly 15 percent of your velocity.
• C-Items: The rest of your inventory that is slow moving and contributes the least to your bottom line. These items are typically counted once per year and consist of the bottom 5 percent of your velocity which is roughly 50 percent of your inventory.

How to determine ABC

When determining your ABC categorization, it is important to factor in these 5 key pieces of data to give an overall idea of the value of each item. Once you have all these factors determined you will be able to assign them to the ABC categories based on their ranking in each field. 

• Velocity- The velocity of an item is essentially how often a piece of inventory is “touched,” this includes all sales, receiving, transfers and adjustments of this piece. The more often a piece of inventory is moved it opens up the possibility of being lost or stolen. 
• Investment in inventory- The investment in inventory is essentially the total dollar amount tied up in each piece of inventory. The higher the cost value is the higher you would want to rank this item which leads to it being counted more often. 
• Number of units- The number of units is an important factor because the more you have on an item the more chance you have of losing or misplacing an item. It also will be beneficial in inventory management and finding overstocked items. 
• Cost per unit- The individual item cost is an important factor because the higher value of an item even losing or misplacing one piece could really affect your bottom line. 
• Inventory adjustments- If an item is being continuously adjusted out in large quantities it may be a red flag, therefore items with large adjustments should be factored into the 5 data points. 

How often to count and who to count?

Once you have your ABC analysis completed you will be able to sort your inventory based on these factors and determine which items you need to focus on first. Your A inventory items will be counted more often and can even be added into your warehouse staff’s day to day operations. Once you complete all of your A inventory items you can move on to the B category which should be counted semiannually, and then onto the C category, with the least effect on your business these items can be counted annually. Utilizing your own staff is best practice as they will have a vested interest in the inventory and the accuracy of their counts. They will also be familiar with the many tools retailcloud offers to make these tasks simple.

Perform Your Inventory Counting with retailcloud

Streamline your inventory counting with retailcloud’s powerful tools! Using mInventory and nguage, you can simplify and accelerate your inventory management. With mInventory, manage your inventory directly from your mobile device, making stock counting and adjustments quick and efficient. nguage, retailcloud's integrated analytics platform, provides you with real-time insights and actionable data to optimize your inventory management. Don’t let inventory take over your valuable time—use retailcloud’s solutions to gain control, reduce discrepancies, and make smarter, data-driven decisions. Start using mInventory and nguage today and transform the way you handle inventory!