What is Inventory Cycle Counting in Construction?

Introduction

In this Inventory Cycle Counting guide, I’ll cover strategic counting techniques, best practices, and key functions that can hugely increase your inventory cycle counting efficiency and accuracy. This is especially important in construction, where incorrect inventory records lead to project timeline delays, lack of material availability, and poor project cost efficiency.

Maintaining precise inventory data is crucial for modern supply chains, especially for construction firms that rely on just-in-time delivery and efficient material usage. Knowing exactly what’s on hand is essential for production planning, supply chain management, and, ultimately, successful project execution. Implementing a cycle count process is a dependable method to achieve this.

Traditional year-end inventory counts are replaced by more frequent counting of specific items using Cycle Counting. This streamlined approach benefits from flexibility in counting and pinpointing what process will work best for your warehouse or construction site inventory.

Bldon’s Cycle Counting Insight:

When paired with a consistent Cycle Count, a one-time Physical Inventory Count becomes more accurate and less disruptive. This strategy also helps improve inventory accuracy and visibility using the most current data, as it maintains project timelines and keeps costs in line.

Types of Cycle Counting

1. Manual Counting

The common way of doing this is to trace inventory with pen and paper or basic spreadsheets, and then manually enter that data into an inventory system. Manual counts, while simple, are subject to errors in human interpretation, especially in high-volume situations such as construction material storage.

2. Mobile Counting

Mobile Counting integrates item tracking, data review, adjustments, approvals, and more within one unified system. By reducing manual steps, this method enhances accuracy across the inventory lifecycle.

Within Mobile Counting, there are two main types:

2.1. Physical Inventory Counting

Often called a wall-to-wall or annual count, this process can be conducted in scheduled or manual intervals. In contrast to traditional counting, advanced physical counting solutions do not interrupt ongoing operations, and are a viable solution for construction sites.

2.2. Cycle Counting Programs

In Cycle Counting Programs construction firms test subsets of inventory in certain areas or bins at regular intervals. This method gives us the ability to see on a real-time basis, how items are moving and how items are in regard to their location and this allows us to always keep an eye on what’s going on, at any time without interrupting our operational processes. In construction, this visibility is crucial since materials need to be tracked well to prevent project delays and costly trial work.

Benefits of cycle counting: 

Routine cycle counts allow construction companies to keep their inventory records up to date every year. This allows teams to spot and correct inconsistencies in real-time, eliminating errors in stock and increasing inventory accuracy.

Some key benefits include:

• Increased Inventory Accuracy
• Reduction of Warehouse Errors
• Reduced Over and Under Stocking
• Net income, Buying rates, Total costs, and Optimized Inventory Purchases

Risks of Manual Counting

Errors from outdated counting processes can cause inaccurate counting charges, lead to order fulfillment issues, and can also lead to costly missteps. In manual inventory, you’re highly susceptible to error: Misrecording quantities or simply mixing up the locations. When inventory isn’t stocked to meet project needs, this can result in overstocking, understocking, and operational slowdowns for the construction firm. When manual counts are used, it’s also time-consuming and requires many hours coupled with halting other activities while counting.

Bldon’s Cycle Counting Tip:

Divide items into smaller groups when addressing discrepancies. After completing a count, it’s common to encounter minor errors that may cause inconsistencies in your records. To manage this, break discrepancies down into small, manageable groups and assign a different team member to recount. This approach helps ensure the accuracy of your inventory data.

Popular Cycle Counting Methods

Many companies begin by selectively counting specific items before transitioning to a complete cycle counting program. Before fully implementing cycle counting, it’s important to assess which method is best suited to your inventory based on the unique characteristics of the items you stock.

Here are Three Effective Cycle Counting Strategies:

ABC Counting

Based on the 80/20 rule, ABC Counting allows you to categorize items by value, volume, or other significant business metrics. For instance:

1. High Volume or High Value

Items with high value or volume should be counted quarterly.

2. Medium Volume, Higher Cost

Items with moderate turnover are typically counted twice per year.

3. Lower Volume, Lower Cost

Lower-value items are usually counted annually.

How to Implement an ABC Cycle Count:

Set Up Counts and Approvals

Define items and classifications for each count. Schedule more frequent counts for high-value items (A and B classes) to maintain precision in inventory data. C-class items may only require an annual count.

Determine Count Frequency

Set an annual minimum for each classification to ensure items are counted appropriately.

Generate Count Schedules and Sequences

Schedule, review, and approve counts as soon as they’re complete for optimal accuracy.

Review Your ABC Analysis

Reassess ABC classifications annually to confirm that items remain in the appropriate categories.

2. Bin Sequence Counting

If ABC Counting doesn’t align well with your inventory, another option is to divide your warehouse into sections and count items sequentially. Randomizing the order of these counts prevents predictability and reduces error.

3. Random Sample Cycle Counting

This approach involves counting a randomized selection of SKUs, assigning each a specific date. You can choose between:

• Constant Population Counting: Items may be counted multiple times within a brief period, as they remain in the active warehouse items group.
• Diminished Population Counting: Items are removed from the count group until all other items in the warehouse are counted.

Inventory Cycle Counting Process

1. Start with Accurate Data

Before starting cycle counting, conduct a thorough physical count to ensure your system has the correct baseline numbers. Without this, your cycle counts may be inaccurate from the beginning.

2. Adapt for Limited Bins

If you’re working with few or no bins, consolidate your inventory as closely as possible. For sites with cross-merchandising, clear labeling, such as colored tags, helps keep track of all item locations and facilitates recounts.

3. Prioritize Organization

An organized warehouse setup is essential for accurate cycle counting. Make sure all items are properly labeled and accurately represented in your warehouse management system (WMS), leaving out any unshipped or newly received items.

Best Practices Tip:

• Announce Physical Inventory schedules in advance.
• Ensure all WMS transactions are up-to-date before the count.
• Avoid processing any additional transactions during Physical Inventory to maintain count accuracy.

4. Analyze Warehouse Data

Review transaction records to determine the best cycle counting strategy for your inventory—whether that’s ABC Counting, Bin Sequence Counting, or Random Sampling.

5. Launch the Counting Process

Ensure team members perform counts with precise details on quantities and item locations.

Bldon’s Cycle Counting Tip:

Complete recounts and approvals immediately after the initial count to address any discrepancies. This step is essential for up-to-date, accurate data in your WMS.

6. Maintain Ongoing Cycle Counts

Regular cycle counts keep inventory accuracy high year-round, preventing discrepancies and ensuring that your records reflect real-time data.

How Often Should You Cycle Count?

Cycle counting frequency and technique should be tailored to each business’s unique inventory needs. The goal is to maintain inventory accuracy while avoiding any interruptions in daily operations. Counts should be spread throughout the year and manageable enough to complete in a single day. This frequency will depend on factors like inventory type, order volume, and business needs.

Real-World Application

Industrial Controls Solutions once spent three weeks conducting an annual inventory count with time-intensive manual processes through QuickBooks. With bldon.com’s cycle counting solutions, they’ve reduced this process to just two days. Cycle counting also allows them to avoid sectioning off inventory, enabling operations to continue seamlessly.

Why Use Bldon.com for Cycle Counting?

Not all cycle counting solutions offer the same level of functionality. Here’s what makes bldon.com’s counting solution stand out:

Built Directly into Your ERP

For accurate, efficient cycle counting, a cloud-based, ERP-integrated mobile barcoding solution is essential. bldon.com leverages a native warehouse management system built into NetSuite, streamlining your inventory count process.

No Halts to Operations

Interruptions to warehouse operations are costly and inefficient. bldon.com’s cycle counting solution eliminates the need to pause activities for physical or cycle counts, allowing continuous operations without downtime.

Versatile Counting Options

The solution provides multiple counting modes to accommodate different inventory needs. Staff can navigate to items or bins directly, conduct blind counts, or use scan-only functions. These options enable flexibility in counting, whether for specific items or overall inventory.

Real-Time Count Progress Tracking

Managers can track inventory counts in real-time, monitor variances, and address any errors promptly. With real-time visibility, supervisors can efficiently review and approve adjustments for better data accuracy.

User-Friendly Interface

With an intuitive design, automated functions, and advanced analytics, bldon.com’s solution makes it easy to track inventory locations and movements. The system is simple to implement and train on, allowing consistent cycle counting directly from your primary platform.

Advanced Cycle Counting with bldon.com

Once you’ve established a cycle counting routine, take it to the next level with bldon.com’s advanced features tailored to your specific business needs:

Stock Count Planning and Scheduling

Different businesses require different counting setups, and bldon.com’s Stock Count Planning enables you to save custom configurations for easy reuse. Create a comprehensive inventory counting program with configurable stock count plans that can run automatically or be scheduled as needed. Each count plan focuses on a defined portion of inventory (daily, weekly, monthly, quarterly, or annually) to ensure consistent and accurate cycle counts.

Counting Groups for Customizable Flexibility

Bldon offers flexibility through Item Counting Groups and Bin Counting Groups:

• Item Counting Groups allow you to organize items into specific count groups, either manually or by importing data.
• Bin Counting Groups allow similar customization by assigning bins into manageable count groups, also supported by manual entry or CSV import into NetSuite.

Cycle Counting in Practice

Let’s consider, for example, the XYZ industry. Before adopting bldon.com’s solution, the XYZ industry faced significant inventory adjustments after annual counts. But now, a single team member conducts daily cycle counts, allowing them to quickly detect and resolve any inaccuracies within bins or locations.

Conclusion 

Inventory management is only the first step in the cycle counting story; it’s a super efficient way to make your warehouse more accurate and more efficient. You can use a tailored strategy like ABC counting, bin sequencing, or even random sampling. By doing this, you can also keep your stock levels precise and reduce operational disruptions.

These benefits are amplified by the right tools. Using bldon.com’s advanced inventory management solutions, you will enjoy features such as real-time tracking, and seamless ERP integration. It’s no manual processes or costly downtime—just efficient cycle counting.

Now is the time to take charge of your inventory and create success in the business. We can help you simplify your cycle counting process and create a stronger foundation for growth.