The Real Goal of Cycle Counting is to Never Have to Count It Again
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Transcript of The Real Goal of Cycle Counting is to Never Have to Count It Again
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The Real Goal of Cycle Counting is to Never Have
to Count It Again
John H. Capron, CPIM
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This Presentation will cover:
A review of the standard Cycle Counting MethodologyThe Control GroupA modified Cycle Counting Methodology
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Standard Cycle Counting Methodology
Objectives
Identification of causes of errorsCorrection of conditions causing errorsMaintaining a high level of inventory record accuracy Correct statement of assets
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Standard Cycle Counting Methodology
Process
Sample count records frequentlyTest their accuracyIdentify causes of errorsMonitor quality of record accuracy
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Some Statistics on Using Cycle Counting as the Primary Means of Maintaining Record
Accuracy
Source:“The Limitations of Cycle Counting”Richard T. Graff, CFPIMPRODUCTION AND INVENTORY MANAGEMENT JOURNALFourth Quarter - 1987
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Population Sample Size Formula
Sample Size = Z2PQ/T2
Where:
Z = confidence limit based on area under the normal curveP = the expected population proportionQ = (1-P)T = tolerance limit
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For an Expected Accuracy of 95% +/- 2%
(1.65)2(0.95)(0.05)/(0.02)2 = 323
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For an Expected Accuracy of 99.9% +/- 0.1%
(3.1)2(0.999)(0.001)/(0.001)2 = 9600
Note: the size of the part universe is immaterial
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Standard Cycle Counting Methodology
BenefitsEfficient use of a few experienced people continuously all year longTimely detection and correction of causes of errorFewer mistakes in item identificationMinimal loss of production timeSystematic improvement of record accuracy
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Standard Cycle Counting Methodology
MeasurementMust stratify the inventory by classEstablish significance
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Standard Cycle Counting Methodology
Phase 1: Cleanup the Input/Output ErrorsEstablish a control groupo Select a small number of high activity items
Count every dayDetermine the causes of errorsCorrect the causes of errorsWhen control group is 100% error free, begin the full scale cycle counting program
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Standard Cycle Counting Methodology
Phase 2: Begin Daily Cycle Counting ProcessCalculate daily work loado total item counts required divided by number of work
daysHire required number of cycle countersTrain the cycle countersBegin daily cycle counts
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The Function of the Control Group
Let’s Revisit Phase 1 of the Standard Cycle Counting Methodology
Establish a control groupo Select a small number of high activity items
Count every dayDetermine the causes of errorsCorrect the causes of errorsWhen control group is 100% error free, begin the full scale cycle counting program
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The Function of the Control Group
…the key statement here is…
When control group is 100% error free, begin the full scale cycle counting program
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The Function of the Control Group
What does this say about the control group?
It’s a predictor of the accuracy of the onhand balances of the inventory population
…therefore…
it’s a means of monitoring inventory accuracy through sampling
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The Function of the Control Group
Control: A Definition
“…to verify by a standard of comparison…”
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The Function of the Control Group
If I can monitor the integrity of my inventory with a control group…
Why would I ever want to count it again???
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A Modified Cycle Counting Methodology
Establish a control groupo Select a small number of high activity items
Count every dayDetermine the causes of errorsCorrect the causes of errors
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A Modified Cycle Counting Methodology
When control group is 100% error free, begin correcting all the inventory balance records
Don’t confuse this with Cycle Counting!!!
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A Modified Cycle Counting Methodology
Continue to monitor the control group while correcting the outstanding inventory balances
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A Modified Cycle Counting Methodology
Once outstanding inventory balances have been corrected:
Continuously monitor the control groupDocument the results
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A Modified Cycle Counting Methodology
Audit the results:
Once a month, have cost accounting audit the inventory balanceso purpose:
• to verify the inventory profile predicted by the control group
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This Presentation covered:
A review of the standard Cycle Counting MethodologyThe Control GroupA modified Cycle Counting Methodology
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And Let’s Remember The Real Goal of Cycle Counting
Is to never have to count it again!!!