Cycle Counting is an inventory management concept that focuses on auditing a warehouse’s inventory.

Cycle counting Objectives

The objective of a cycle count is to track and document inventory levels. While most warehouses will carry out a cycle count at least once a year, it is recommended to complete one more often. This process and its associated procedures ensure warehouse and production teams are working with accurate inventory data. Performing accurate cycle counts often will help maintain the accuracy of your data and the efficiency of your inventory management.

Cycle Counting Versus Full Physical Inventory

Cycle counting is a manual process and can be carried out at any time on specific groups of items and helps refine procedures for tracking and inventory management. The process is designed to be carried out without interrupting a facility’s operation.

Cycle counting benefits include:

  • Provides high levels of inventory accuracy
  • More accurate financial reporting
  • Considered less disruptive to operations when compared to a full physical inventory
  • Can focus on subsets of inventory and items based on specific criteria
  • A reduction in errors associated with bad data
  • Higher levels of customer satisfaction
  • Fewer inventory write-offs
  • Reduced losses due to inventory shrinkage

Cycle counting disadvantages:

  • Highly dependent on buy-in from company leadership down to warehouse staff
  • The process needs to be carried out at regular intervals

A full physical inventory is a complete physical count of a business’ entire inventory, most often carried out on an annual basis. The process is generally manual, time-intensive, and requires shipping and receiving operations to be shut down for the duration of the process. As a result, the full physical inventory process can be disruptive.

To minimize the disruption, businesses often attempt to schedule these procedures during a slow period, when inventory levels are low.

Full physical inventory benefits include:

  • Improved inventory accuracy
  • More accurate accounting records
  • Tax burden relief attributed to the record of losses
  • Control over inventory shrinkage

Full physical inventory disadvantages:

  • Shipping and receiving operations are ceased during the process
  • Time-consuming
  • Inconvenient for customers and supply chain partners
  • An expensive, non-revenue-generating activity
  • A high tendency for human error, resulting in bad data

Many companies complete annual physical inventories as a way of controlling their understanding of what’s in stock at any given time. However, performing a once a year activity to give that visibility leaves gaps.

For this reason, cycle counting is a preferred method of inventory management for businesses of every size. It is not uncommon for businesses to employ both a full physical inventory annually alongside incremental cycle counting throughout the year.

How To Complete A Cycle Count

Cycle counting garners appeal by offering an ongoing and easily achieved approach to inventory management. It is in maintaining the discipline of cycle counting that many organizations find issues.

It should be noted that every organization is different and a cycle count will be adjusted to fit each business’ method of operation. If your organization is interested in implementing a cycle counting program, it would be a good idea to consult a warehouse and inventory management professional. This way, you can avoid costly mistakes associated with trial and error.

Cycle counting involves a physical count of some sub-section of inventory located in a warehouse or other storage facility. It is recommended to complete a cycle count at least once a quarter.

These small cycle counts reveal discrepancies in data that can be logged and rectified within enterprise systems for accurate inventory management.

Here’s a general outline for what’s involved in a cycle count:

  1. Update your inventory records before carrying out a cycle count. You need a baseline from which to work.
  2. Determine the scope of your count. For example, a small cycle count will cover X amount of SKUs, while a larger count will cover XXX amount of SKUs. You could also choose to count items over a designated time period, such as the fiscal year.
  3. Decide which inventory to count first and item subsets to follow. Most businesses generally count their “A”-list products first. That is, the 20% of your inventory that makes up 80% of your inventory value.
  4. Determine the tools and equipment required to perform the cycle count. For example, if your inventory is barcoded, do you have handheld scanners available? If goods can’t be physically counted or handled, do you have a scale to weigh them?
  5. Decide who will perform the cycle count.
  6. Carry out the cycle count based on the details outlined in preparation.
  7. Review discrepancies between the cycle count results and warehouse records.
  8. Make the appropriate adjustments for incorrect data based on your baseline inventory record.

Cycle Counting Workshops

Encompass Solutions can train your staff to carry out Cycle Counts that Count through an educational workshop series led by our experienced inventory and warehouse management consultants.

Learn more about our Cycle Counting workshops HERE or contact us using the link below to speak with a representative.

About Encompass Solutions

Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers and Distributors. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes for hundreds of customers across the globe. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.


Every year, millions of workers brave the cold to perform year-end full physical inventories in the final weeks of the fiscal year – with mixed results. While this annual ritual is in many cases the only way to reconcile inventory variances incurred throughout the year, it doesn’t need to be. Enter the cycle count.

Cycle Counts That Count will help you implement better cycle counting on a daily, weekly, or monthly basis starting in April and let you potentially conduct your last ever year-end full physical inventory that same year. The final full physical will validate your efforts at daily counting and provide management with the data they need to determine when to switch to a cycle only inventory process.

Cycle Counts That Count Or…How I Learned To Stop Worrying About The Year-End Full Physical Inventory And Love The Cycle Count

An effectively implemented cycle count program can, within 9 months, effectively do away with conducting a full physical inventory. That’s right. You can free your organization from the dreaded yearly shutdown that pulls staff away from their families during the holiday season and closes your shipping doors for a week.

Now, what if we told you that our workshop would ensure you’d never have to perform another year-end full physical inventory, ever?

Contact Encompass today to set up your workshop and we can help you perform Cycle Counts that Count!

We can work with you to level work out over sessions that coincide with your low periods.

Cycle Count Project Management

Partner with your Encompass team to lay out a simple project for implementing daily or weekly cycle counting for your organization. The audience should include senior management, such as plant managers, the controller, or the executive team, as well as staff responsible for inventory control.

Our first workshop will review how a typical daily cycle counting program looks, how much time will be required to conduct daily counts, as well as case studies in efficiency gained by accurate inventory adjusted on a quicker basis. A series of planning documents will be provided and reviewed during this session which will create a custom-tailored implementation plan for your organization.

Our second workshop will include the same audience. The consultant will review your implementation plan with you and then provide training on setup, configuration, and daily processing of counts in Epicor. The goal of the session is to provide you with a simple roadmap you can follow to get the program up and running immediately for a small subset of product while you complete the implementation plan and ramp-up to include all products over the following 45 days. The session will be recorded to be used by staff for reference in the future.

Your First Count Workshop

We will schedule a follow-up session with our consultant and your finance and warehouse teams to work with you on setting up and processing your first cycle count.

Quarterly Reporting Workshop

We will then follow up with your inventory control team and workshop with your inventory control team to review your first 90 days of results, and help this team prepare their first cycle counting efficiency reports back for management.

End of the Year-End Workshop

In this workshop, your consultant will review best practices for a year-end full physical inventory and work with your team as they prepare to answer a critical question for management: Is this our last year-end inventory?

The agenda will include time to:

  • Review cycle count reports to determine how well parts are being counted based on ABC codes.
  • Review methods to identify problem parts based on recurring variances and suggest probable root causes.
  • Provide best practices for preparing for the full physical.
  • Provide suggestions for reconciling year-end results and evaluating the cycle counting program’s success for the year.

Encompass is ready to partner with you today. For more information, please speak to your consultant, Customer Account Manager (CAM) or our team at info@encompass-inc.com.

About Encompass Solutions

Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers and Distributors. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes for hundreds of customers across the globe. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.