What’s the Big Deal About Cycle Counting?

Whether we like it or not, every company on the planet with any significant supply chain operation has an inventory reconciliation problem. It doesn’t matter if you are a retailer, manufacturer or logistics service provider, or if you have the latest and greatest warehouse management system. The fact is, if humans have to physically touch or scan inventory in the put away, inventory check or pick process, then errors will occur. The only debate will be the size and scale of the problem.

I talk to many organizations and they all deal with this problem. As you can imagine, there is a broad array of approaches taken and process maturity across companies. Some never check, some shutdown operations to do a full check, and others have a robust approach to cycle counting. In the best case scenario, you have a process that gets you into the 95% to 99% confidence level of inventory. Why not 100%? Just to reiterate, you may have the best warehouse staff on the planet, but if they are following manual repetitive tasks, errors will unfortunately occur.

Why should we care?

It all boils down to the customer experience. I know how frustrated I get when I try to buy a product online and the retailer doesn’t know for sure if the item is in stock or it cannot deliver it to me in a timely fashion. Consumers want retailers to set reasonable expectations and consistently meet them.

If a retailer has 100 distribution centers, each carrying $25M worth of inventory, with a 1% inventory error rate, you can imagine the scale of ambiguity and exposure that would persist around inventory items across its distribution network.

The #1 reason why organizations care is inventory accuracy, and the race to 100% confidence level exists across all omni-channel organizations.

What are the potential solutions to this problem?

I touched on a potential approach in a previous blog post regarding the Four Stages in Digital Disruption, which in the context of cycle counting would mean:

  1. Managed: How does my warehouse management system (WMS) prioritize and manage my process of dealing with inventory?
  2. Assisted: How does the use of barcode/RFID scanners, wearables and other technology enable warehouse operators do their job more consistently?
  3. Automated: What autonomous robots exist for the purpose of checking inventory at the frequency I prefer?
  4. Optimized: What technology exists to give me greater insight into inventory levels, position, movement, etc. with the real-time data received from autonomous robots?

Interestingly enough, organizations that are approaching me for help with #3 and #4 already have significant competence in #1 and #2. But because #1 and #2 still depend heavily on humans, they are still falling short on their inventory level confidence.

By passing the job of automatic cycle counting to an autonomous robot, organizations now have an enabler to get to the 100% confidence goal they are trying to achieve. For example, as reported by Reuters last month, Walmart is 6-9 months from using drones to check warehouse inventory. According to the article, “drones can reduce the labor intensive process of checking stocks around the warehouse to one day, [which] currently takes a month to finish manually.”

What’s the big deal about cycle counting? The answer will be none in the not too distant future.

Matt2006x2729pxMatt Yearling is CEO of PINC Solutions. He joined PINC Solutions as chief executive officer in March 2013 and is responsible for the overall strategic and operational management of the company. Matt’s past roles include vice president and general manager of Encryption Products at Symantec Corporation, senior vice president of Global CRM Product Development at Sage Inc., Chief Technology Officer for Embarcadero Systems Corp (a Ports America company). As vice president of Oracle On Demand, Matt played a pivotal role in making it Oracle’s fastest growing line-of-business.