ERP and Physical Inventory


Your cloud ERP tells you a lot about your inventory and helps you walk that tightrope between supply and demand. Understanding your current inventory helps optimize your working capital while meeting the service level agreements you have in place with your customers.  

But how confident are you that the inventory data you have in your ERP matches the actual quantity of products and goods you have on your warehouse shelves?

An inventory count is a physical confirmation that confirms the product quantity you have in your ERP Platform matches the quantity of inventory you have in your warehouse.

Full vs. Cycle Inventory Counting

Many companies perform regular physical inventory counts as part of their yearly financial accounting practices.

For smaller operations, this count may take a few hours. Large companies with thousands of items typically halt operations for up to a week or more to perform a full physical inventory count.  

But in a fast-paced ecommerce environment, your business probably can’t afford to bring your operations to a halt just to count the number of products you have on hand. Cycle counting is an inventory management option allowing you to count items in a designated area of the warehouse without stopping operations to perform a complete physical inventory.

Cycle Counting Best Practices

Here are a few ways to help you create an effective cycle count program at your company.

Inventory movement class determination

During the ERP implementation project, consider analyzing and identifying the fastest moving items.  These are inbound, outbound, and other movements inside the facility. 

Depending on the movement analysis, you should segregate items from fastest to slowest as an A, B, or C, depending on the mix.  This will help you better classify inventory items for future counts.

Item Location Counts

To determine how often you should perform a cycle count on a specific class of items, consider turnover and product value. Typically, high value and fast-moving items are counted weekly, while the slowest items are counted just once a quarter.  

A list of items by warehouse location will detail the number of times each combination will be counted in a quarter.  

Weekly Counting Plan

After you determine the count frequency, create a list of items that you’ll need to count each week.  

The counting work at the location level is then assigned to teams to count. Consider counting the product twice to provide that extra level of confirmation.  At the end of the count, a supervisor then checks any discrepancies between the two counts or if the two counts don’t match the system inventory.

Zero Counts

Another key principle in any cycle counting plan is utilizing 0 counts. If warehouse processes cause a bin to be emptied by a picking order, then a command is given to the warehouse worker to have them count the bin and confirm it is empty.

This quickly verifies that the bin is empty and will help the facility confirm that the item warehouse location level counts are completed correctly.

When to Perform a Full Physical Inventory

With a well-designed cycle counting program, your company may be able to eliminate or significantly reduce the need to perform a full physical inventory count.

Keep in mind that if cycle counts are not performed correctly or keep indicating inventory discrepancies, you should strongly consider performing a full physical inventory to determine the actual inventory position.

Also, if your company currently doesn’t have a robust cycle counting procedure in place, you should perform a full physical inventory audit as part of an ERP implementation plan. This helps ensure you’re starting with quality data.

The Future of Cycle Counting is Here

There are tools available to help you speed up the inventory management process and decrease the time your team spends on counting products. This includes:

  • Voice Directed Systems: This hands-free technology audibly directs warehouse team members through a workflow including cycle counting.

  • RFID: Use RFID for daily counts of high value or serialized inventory items.

  • Sophisticated automation: Advanced automation options includes drones to track inventory levels in warehouses and retailers using robots to perform store location counts during off peak hours.

Knowing how much inventory you have on hand is critical to a successful operation and a basic requirement when you implement an ERP or invest in warehouse management systems.

Core inventory management has never been more crucial within the modern omni-channel supply chain. Confirming the data you have in your ERP against the physical product in your warehouse helps you meet customer demand and streamline operations.

Warehouse Management Resources

4 Reasons Why a Custom WMS Handcuffs Your Supply Chain

Tips for Lot Controlled Warehouse Design

Bring Your Distribution Center Into the Future

As a Business Director at Blue Horseshoe, Bill Conway streamlines business processes and paves the way for future growth. His extensive knowledge of the NetSuite Platform combined with his passion for teamwork and leadership helps him empower businesses with the right solutions to meet their complex business challenges.

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