Cost of taking annual inventory

[Jon]

We did our last physical in house with the help of employee's families, etc. as one of the other postings described to keep the cost managable. Our variance was .6% overall but probably over 10 % of the OH's were adjusted, they just mostly offset one another. It was great having reliable OH counts but it didn't take too many months before people were griping about shelf counts getting out of whack again. I talked to a manager at a big store in Texas who went through the same problem and had decided to go to cycle counts. To sell his auditors on the switch, he cycle counted for a year and then did his usual year end physical. They were within .1 or .2 %. The auditors spot checked it, agreed that the numbers were good and dropped their demand for the traditional physical.

I have been on ADP for about 18 months and am converting to cycle counting too. With a couple of decent English reports you can set it up so that every number gets counted at least once a year and the 20% of numbers that are 80% of sales get counted more often, maybe as often as weekly in the case of super fast moving items. The end result is more reliable OH counts on your computer on a daily basis instead of only right after a physical and you don't have to deal with the logistics of that yearly physical any more. Once you break it down to counting a small percentage daily there is almost always someone in your department that can find the time to do those daily counts. Once people see how much more they can trust the inventory control system to have good information you may even find an extra volunteer or two. The whole process also seems to make everyone more aware of making sure things get put in the bin that they are supposed to be in and that also improves the reliability of your ICS.