This is the fifth post in our series examining how to measure KPIs for warehouse operations. We recently outlined the 7 KPIs to track for warehouse improvement. This series takes each KPI and examines it in more detail.
What does cycle count accuracy measure?
Cycle count accuracy is an inventory measure. It shows the percentage of cycle counts that have zero adjustments – that is, how often a cycle count is wrong. It helps identify stock accuracy, supplier accuracy and process improvements.
Historically, warehouse operators might have undertaken a complete stock take once or twice a year. But at that sort of scale, the warehouse needs to be shut down, as you can’t have people picking the items while they are being counted. And a huge stock take is very time-consuming. So, in between these full inventory counts, stock levels can become inaccurate. That’s where cycle counting comes in.
Cycle counting is counting just parts of the inventory. For example, a company might check the stock levels in just two of the aisles, or perhaps a full product group. This is counting little and often, rather than counting everything in one go. The warehouse can remain operational, because it doesn’t take too long and the warehouse system has a live database view of stock levels.
How is cycle count accuracy measured?
A cycle count accuracy KPI measures how often there is a discrepancy in a location. There are three ways it can be expressed:
- Firstly, you can check if the stock is inaccurate and if so, how often? If the answer is yes, a percentage across all stock is given. So if 10 out of 100 cycle counts are wrong, that gives a 90% accuracy.
- Alternatively, a weighted measure can be calculated. This shows how inaccurate the cycle count is; how far out it is. For instance, if there are supposed to be 100 units in a bin, but there are only 98, it’s 2% out. And this figure can be measured across all stock.
- Cycle count accuracy can also be measured in value. This looks at the value of the stock inaccuracy and therefore provides weight to the measurement, especially where higher value goods are concerned.
The results will indicate if there are problems, and if so, these can be further investigated. Where there is a great deal of inaccuracy, a warehouse might have a theft issue. Or small amounts of inaccuracy could mean process problems, such as putaway methods being misunderstood by operatives, or issues with supplier ASNs being wrong.
What is a good cycle count accuracy score?
An absolutely perfect score would of course be 100% – that is, zero inaccuracy. A warehouse manager would always be aiming for a perfect cycle count accuracy. But in the real world, this is rarely the case and generally there’s often a small inaccuracy. However, it’s very possible to achieve high rates of accuracy – 99+% for example.
What’s more reasonable for distributors though is finding a value that they are happy with. And if they haven’t tracked this KPI before, establishing a benchmark is vital before embarking on any improvement programmes.
How can you improve your cycle count accuracy score?
Simply employing a warehouse management system (WMS) will improve your stock accuracy. We always see an increase when we deploy a new WMS for a customer. And if the system is used properly, there shouldn’t be any inaccuracy – theft aside, of course. One of our clients, Camlab, saw its stock taking accuracy increase from 75 to 80 percent to 99 percent.
The WMS tracks all movements, and where handheld scanner guns are used, these monitor every transaction, like picking or receiving. This gives stock precise traceability and lessens the chance of errors. For example, if an operative picks from a bin and the system is expecting that to use the last of the stock, it will automatically trigger the worker to do an empty bin check. Adding in spot checks like this here and there only adds to the accuracy across the warehouse.
And because the staff are following the scanners, rather than relying on memory as to where the stock to be picked is located, there is less chance of human error. The operative is less likely to misread the product, so won’t just pick what they thinks is the correct one.
Having a stock count schedule planned in advance will improve accuracy. A cycle count routine can be created within the WMS, perhaps configured so that only certain products are pinpointed for stock counting. Some distributors might only count their high value or frequently picked products, for instance.
Discrepancies can also be identified by undertaking an audit process on outbound orders. This is an additional checking phase that spots any picking inconsistencies.
If you would like to explore the options for improving your technology, or would like to discuss how to measure cycle count accuracy, we can help. Our supply chain consultants can analyse your distribution operation and advise on KPI metrics, as well as recommend technology to help boost your supply chain performance. Call us on 020 8819 9071 or get in touch.
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Full list of articles in this measuring KPIs series: