Cycle counting and FIFO/LIFO are two inventory management methods used by companies to ensure accurate records of materials. Modern software also allows for easy inventory tracking.
Taking inventory is part of the basic process of responsible business management and control. By periodically performing a physical count, you can ensure that all relevant items are properly accounted for and that current documents relating to the value of inventory are accurate. Here are some of the different ways companies have managed this type of material control over the years.
One time-honored approach to inventory is known as cycle counting. Used for many years in textile factories, this approach required taking regular physical inventories of a portion of the materials stored in factory-level supply stores. Many textile companies manage their supplies using what is known as a material code, which is simply an easy way to categorize various components and materials associated with the function of a particular factory department.
A typical cycle count would identify a limited number of material codes for inventory each calendar month. Selected material codes would be subject to a physical count, with each unit of each item listed under these codes physically counted. The result of the cycle count is compared to the records kept of receipts and issues of these items, and differences between the two are noted and reconciled. Cycle counts are usually structured to allow all inventory to be physically counted throughout the year and can often greatly ease the process of performing an annual reconciliation of materials for entire stores.
Thanks to the use of modern software, it is also possible to quickly take inventory of a selected group of items with great ease. For example, generating a printout of the amount of office supplies that must be available is very simple. The printed report will reflect how much of each item has yet to be issued for a given department, as of the date the report is extracted. This approach requires that all receipts and issues be recorded in the database before the report is generated; otherwise, counting will be disabled.
Many companies employ a process that relies heavily on the use of FIFO and LIFO. Acronyms for first in last out and last in first out respectively, this type of inventory management relies on accurately recording when items arrive and when they are disbursed to a particular company department. With this approach, the remaining units of a given item are physically checked after the day’s receipts and issues have been entered into the supply chain database. This process often allows small businesses that need to keep inventories to a minimum for tax purposes to always know exactly what they have on hand and to take action if a significant amount of a given item cannot be accounted for.
Inventory processes can be very elaborate or very simple, depending on the needs of the company. By choosing the right type of tracking system and software, and being diligent in physically counting units on a regular basis, you can ensure that material records are kept accurate at all times. This makes it much easier to evaluate all types of inventories, from raw materials to finished goods.
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