An inventory cycle count is a tried and tested strategy in managing construction inventory that involves counting a specific subset of its entirety on a particular date, at a particular time, consistently, and repeating intervals. Also referred to as cycle count and cycle counting, the inventory cycle count, is a reliable way of tracking inventory and determining overall inventory value.
For example, suppose you own general contractor business. In that case, you might inventory all your building materials at your headquarters every 15th day of the month and your construction tools and equipment at your central warehouse every first week of a new quarter. This is what creating an inventory count schedule looks like.
Construction inventory counting is a fusion of art and science, and you and your construction team will get better and faster in conducting these cycle counts over time.
Why Is Inventory Cycle Counting Important?
Generally, the main objective of cycle counting is to keep tabs on a company’s inventory by counting a specific subset of inventory at fixed and regularly scheduled intervals. Typically, an annual audit of every little thing a company owns and keeps in stock often requires businesses to close for a day or two, which is seldomly performed to prevent inventory loss. The purpose of inventory count is to offer businesses a valuable and efficient alternative to time-consuming and costly inventory counts.
You may also encounter an inventory cycle count known as inventory cycle audit as well.
Who Should Be Tasked With Inventory Cycle Counts?
Company inventory cycle counts must be performed by a trustworthy and accurate employee in businesses that have the manpower to handle inventory audits without neglecting their actual work responsibilities.
However, project managers or inventory managers-—as the deciding body— have the responsibility to weigh the advantages and disadvantages of inventory cycle counting. While it’s true that inventory cycle count provides accurate glimpses of the status of the company inventory, there are other innovative options in the construction team that you might consider as well.
Small construction companies with only a few stockrooms and inventory to count could probably get by with the annual full-on manual inventory. Still, big companies that handle various projects need to divert their energy to more important matters at hand. That is why even the small and big construction companies alike will benefit from inventory management software to track changes in their inventory in real-time or as they happen.
Inventory cycle counts are a certain mainstay in the audits in the industry. During an inventory cycle count, the team counts a specific amount of inventory on a fixed, recurrent day. This allows companies to keep tabs on their inventory without having to quantify everything all at once. They could either perform the counts per project site or in the main company warehouse for construction companies.
Tips in Handling Construction Inventory Cycle Counts
1. Count What Matters The Most
Inventory cycle counts are critical since they protect businesses against loss. And since the best defense is a good defense, make sure that you give your inventory a considerate amount of attention, especially when it matters the most. For example, construction companies must be more alert to frequently count their protective covers inventory during the rainy season, as they could properly cover up their finished work and unused building materials on site. It is also worth noting the inventory that is more in demand depending on the season, so it’s better to prepare your construction inventory list to prepare beforehand and be one step ahead of your competitors.
2. Count The Most Essential
While all the items listed in your inventory are important, some stocks are more essential or valuable than others. It’s is helpful that you determine the most in-demand items is in your warehouse, then establish a commitment that you will never run out of it. This is where inventory count plays a vital role as it helps you keep tabs of not only your most valuable inventory but also the minor ones, so make sure to schedule them regularly and incorporate a construction tool, like a web-based inventory software, to monitor your data and access it anytime through the cloud.
3. Focus on One Category
While it can be tempting to perform several cycles counts simultaneously to save time, most companies, regardless of the industry, benefit more from counting only a certain group of items at a time. By reducing the number of items needed to be counted, you can expect a more accurate count from your team. Additionally, employees with other responsibilities can shift their time doing other activities without affecting your overall operation’s productivity and your client’s satisfaction ratings.
4. Put Your Most Reliable Employees on The Job
Since physical inventory counts are conducted manually by real people, you can’t prevent human errors and mistakes. To mitigate this issue, assign your inventory counting to your most reliable, detailed, and trusted employees. After all, the goal here is to perform the inventory counting most accurately and efficiently possible. Otherwise, you are setting yourself up for rework and recount if it is just done for the sake of having it done.
5. Schedule Inventory Counts Regularly- or Not
Some construction companies, unfortunately, experience shrinkage due to inventory loss of theft. This is especially prevalent in sites with little to no security measures when it comes to their workers so that theft can be expected. While cycle counting is generally performed on a frequent, fixed-scheduled basis, some companies opt to count more frequently and randomly than the conventional to discourage messed-up numbers. It is then the responsibility of the project manager or inventory manager to choose the best option for their projects, as it will surely affect the overall timeline of the project and the work schedule of the workers involved in the counting.
Why ABC Analysis Is The Best Option For Inventory Cycle Counting
One of the most popular ways of categorizing your construction inventory is using ABS Analysis. Suppose your company lacks the manpower needed to count all the inventory that you have. In that case, ABC Analysis can surely help you identify the most profitable and essential inventory that you possess. With this, you can bring all your attention to practicing strict inventory management of the identified most profitable items.
What Is ABC Analysis?
ABC Analysis is a traditional and effective inventory categorization strategy where your inventory is subdivided into three major categories— A, B, and C. The A category received the most detailed and tedious auditing and tracking between the 3. On the other hand, Category B receives somewhat detailed attention, and lastly, Category C receives less attention and time.
To incorporate this technique into your inventory system, simple categorize your entire inventory into three specific groups:
- Category A: These account for 20% of your inventory items but totals 70% of the consumed inventory value.
- Category B: These accounts for 25% of your inventory items but totals only 25% of the consumed inventory value.
- Category C: Lastly, these inventory items account for 50% of your entire inventory but only 5% of the consumed inventory value.
How Can To Incorporate ABC Analysis to Inventory Cycle Counting
Once you have identified the inventory items that matter most to your company operations, you can streamline the cycle counting system by prioritizing the identified Category A items. Yes, you should still give your Category B items ample time, but not as much as A. You shouldn’t forget Category C as well, but in case something has to slip through the cracks of your inventory, make sure it’s one of the Category C items and not from A or B.
ABC Analysis method helps both small and large construction companies figure out where to divert most of their inventory management resources. In conclusion, Category A inventory should be counted most regularly and frequently.
It is also worth noting that the core concept of the ABC Analysis categorization is similar or the Pareto Principle. Used across a wide array of industries, the Pareto Principle or most likely known as “the law of the vital few,” suggests that 80% of the total effects come from just 20% of causes. In construction inventory management, this principle applies to stocks and profits.
How To Perform Construction Inventory Count?
Now that you have determined which inventory items require the most attention, you can now proceed t the cycle count of your physical inventory using the tips mentioned earlier. To further help you implement this system to your business, here is a step-by-step process for beginners to recommend that you try out.
- Establish an inventory cycle count schedule, and make sure to stick to it.
- Order count tags, each sequentially labeled, so you can accurately track your inventory.
- Preview your entire inventory. Have a good perspective of all the things that you will organize.
- Halt any warehouse activities. During inventory count, no item should be removed or restocked.
- Clarify the inventory procedure with the rest of your team, so there is no confusion once you started.
- Break your inventory team into groups, if needed.
- Distribute the tags, and clarify what each group should count, respectively.
- Count inventory. Usually, one team will do the manual labor of counting all the physical items, and the other party is tasked to record the findings. You can personally assign what information needs to be recorded in the count tags.
Transfer all counting data into construction inventory software to ensure that all your data is stored and can be accessed anytime, anywhere.