Every year hundreds of dealers across the country engage in the process of checking the accuracy of their parts inventory. Many are planning that event right now using one of two different processes.
I know some dealers who don’t regularly check their inventory. There is no law saying “thou shalt count your parts.” It’s not in the Bible either, I checked. It is hard work, and you may wonder if you’ve made it better or worse. However, inventory accuracy has a huge impact on customer satisfaction, and your parts inventory is a large asset on the balance sheet. I highly recommend dealers check their inventory.
The most common process to check inventory accuracy is a Physical Inventory. It requires you to count every part in your inventory, during a short window of time, ideally when the business is not operating. Counting and correcting thousands of parts is a huge task. You end up working long hours and sometimes feel like you are spinning your wheels — all the while, knowing you are going to relive this experience in 12 months. I wish I had a nickel for every hour I’ve spent counting parts until late at night fueled only by cold pizza and caffeine.
There is an easier and better way to improve inventory accuracy than doing an annual Physical Inventory. Cycle Counting delivers better long-term results. By definition, Cycle Counting is checking small subsets of your inventory on a frequent basis.
Top Six Advantages to Cycle Counting
- No brutal event, no significant downtime.
- More time is available to identify the root cause of an inventory error. Simply correcting the count does not solve the problem. We must address the root cause.
- The discipline of checking more frequently builds competency in maintaining accuracy.
- The frequency and volume counted can fit your business and season.
- Statistically more likely to catch an error closer to the occurrence.
- Inventory Accuracy can be measured more frequently as a metric.
When implementing Cycle Counting there are a few things to keep in mind:
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Discipline is the key
Don’t tell yourself “I’ll do Cycle Counts when I have time.” Set your cadence. I recommend it daily or weekly. If you don’t have enough time in-season, then reduce the number of parts you count, but don’t put the process on “pause.” I would rather you count 20 parts a day, or 100 parts a week, than 500 parts a month. -
True Cycle Counting is dynamic
The more we touch a part, the more frequently we should count it. Simply put, count fast movers often and rarely count the slow movers. -
Find a champion
Select someone to be the Champion of Inventory Accuracy. That person is solely responsible to enter the counts in the system, and more importantly, investigate the root cause of the error. Sometimes we can’t positively identify the cause of the error. In that case, we need to narrow it down to 2 or 3 possibilities. The most important step is to make process improvements to avoid repeating that error. My preference is to involve everyone with the actual counting. I like to start the day with a quick count, and it is all hands-on deck. We may only spend 5-10 minutes counting, but we do it EVERY day.
Transitioning to Cycle Counting can be a challenge and may feel like a big hill to climb. The process is not hard, although convincing others you will see better results can be. A Physical Inventory is familiar to them, and they may question the effectiveness of Cycle Counting. Convincing the management team to leave a process they have trusted for years can be daunting. The thought of telling your parts employees “Now you get to count parts everyday” may be unsettling. If you are hesitating to pull the trigger on this change and need to talk through it, give me a call. I would be glad to share what I have learned by switching to Cycle Counting. I hate to think you’re counting parts for 14 hours straight eating cold pizza and washing it down with room temperature Mountain Dew.
