The CYCLE COUNT Module is provided for the user to establish a daily routine for counting INTERNAL inventory. Note: Only user owned inventory will be considered – NOT “consigned” (Customer owned), and/or WO-WIP or WIP locations. If the user needs to count “consigned”, or a smaller range of internal parts outside the ABC Code setup, ManEx suggests to use the Physical Inventory module. Records that have been allocated will display in red within the Inventory Cycle count module. If the users attempt to edit the record that is allocated lower than the allocated qty it will display a message. In-Store inventory will be considered unless the "Ignore In'Store" box is checked within the ABC Types Setup module, if this box is checked then In-Store warehouses will NOT be considered in the Cycle Count.
The ABC codes need to be specifically setup for Make parts, if Make parts are to be included in the cycle count. If an ABC code is setup for a buy part and that ABC code is assigned to a Make part the make part will NOT be included in the cycle count and vica vera.
The three steps to completing Cycle counting activities in ManEx are:
1) Create a New List - User generate a list of inventory items to count by clicking the "Run Cycle Count Setup" button (Add button).
2) Count and Record Results - Then the stores keepers physically count the items listed and enter the quantity counted for each item into the cycle count screen.
3) Reconcile Differences - At the conclusion of the data entry, the data is reconciled with the inventory records. If the count is different than the record, then the user is prompted whether to accept the difference or to recount and re-enter. Count adjustments are logged to the GL adjustment account, if accounting is used.
A report is available summarizing and itemizing the results of the cycle count activities. If the user has established cycle count tolerances in the ABC Types setup, then a report will delineate the number of times that the cycle count exceeded the permissible tolerance.
The frequency of counting for each part is defined in the ABC Type setup, and based on the ABC Type assigned to each part.
There is provision to automatically assign ABC Types after the user has been operating the ManEx system for some time. The user has the option to base the assigned ABC Type on either the current dollar value of the inventory, or the Estimated Annual Usage dollar amount of inventory. If the user chooses to reassign ABC Types automatically, the ABC Type setup must have established the amount (by percentage) of inventory value to be attributed to each ABC Type.
There is also a provision for establishing the EAU (estimated annual usage) for each inventory item. The EAU is based on inventory issues in the last 30 days, weighted by another factor to account for historical issues. In order to create the EAU, there must have a minimum of 30 days activity in issues from stores.
Cycle Counting is the practice of counting a small subset of inventory on a given day. It can be an effective and efficient method for maintaining current on-hand inventory counts. It allows for greater flexibility, greater accuracy, and less interruption to production than an annual physical inventory.
The first step in establishing a cycle counting program, is to determine component groups and group count frequency. Groups are typically designated by their ABC code with A parts counted more often than B parts and B parts counted more often than C parts, and so forth. Some common parameters, in this industry, for determining the correct ABC code are: Value, Lead Time, Usage, EAU Value, and Hybrid.
Value - This method groups components according to their on-hand value. The components with the highest on-hand value are counted more frequently than those with a smaller on-hand value. This method is ideal from an accounting perspective as it typically results in a much smaller variance in inventory value, but may not be ideal from a supply chain management perspective since even inexpensive components can cause expensive production delays and missed shipments. This is relatively easy to calculate and can be assigned manually if needed.
Lead Time - This method groups components according to their lead time. Components with long lead times will receive more frequent counts and thus have higher inventory accuracy. While this makes sense from a supply chain management perspective, it can lead to high inventory value variances since expensive components don't always have long lead times. This is relatively easy to calculate and can be assigned manually if needed.
Usage - This method groups components by their annual usage (EAU) regardless of their value or lead time. The argument for this method is that the more frequently accessed components have a greater likelihood for inventory variances and should therefore be counted more often. This method tries to reduce the impact of human error in inventory transactions. However, it may not minimize variance in inventory value, or prevent long lead parts from stopping production if those parts are not used as often. This may be a little more difficult to calculate manually, but can be done if needed.
EAU Value - This method groups components by the value of the annual usage (EAU). This method attempts to rectify the inventory value variance issue with the Usage method, by including component costs. It is likely to have a lower inventory value variance, but may not fully adjust for inexpensive or low usage parts with long lead times. This may be a little more difficult to calculate manually, but can be done if needed.
Hybrid - This method combines any or all of the methods listed above. This method assigns components with high on-hand value, high usage, and/or long lead times to group A. This ensures that parts with the greatest potential for causing production delays or inventory value variances are counted most often. While this can be done manually, it is better to allow the ERP system to assign and adjust the ABC code according to current conditions.
The second step is to determine how often each ABC code should be counted. Higher count frequencies lead to more accurate inventory records, but also increased handling costs. Management needs to find a balance between cost and benefit. One common frequency is to count A parts every 30 days, B parts every 120 days, and C parts every 180 days.
The third step is to determine the best time of day for cycle counting activities. Ideally this will occur either before production begins, or at a time when production and inventory movement will be at the lowest level of the day. This can be early in the morning before production starts or during the standard lunch break.
The fourth step is to determine who should be responsible for performing cycle counting activities. Because cycle counting reduces the daily time required, the focus can shift from speed to accuracy and process improvement. A shift that requires knowledgeable and experienced employees to conduct the cycle counting activities. This is typically limited to employees in inventory.
The final step is to start counting and discovering the sources of each significant discrepancy. As part of the counting process, it is imperative to identify why discrepancies exist and work to eliminate the sources. Initially, it is far more important to identify and eliminate sources of discrepancy than to get through the full cycle each period. Not only will eliminating sources of count discrepancies reduce costs and production delays, but it will speed the cycle counting process as well.
A well designed and executed cycle counting program should achieve an accuracy of 97% or more.
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