Year-End Inventory Count vs. Year-Round Cycle Counting: Which Method is Better for Your Brand?
In the complex landscape of D2C fulfillment and retail fulfillment, effective inventory management is crucial. Two common methods for inventory counting are the traditional year-end inventory count and the more modern process of year-round cycle counting.
Both help you identify issues such as shrinkage, miscounts, or clerical errors, and help you make decisions moving forward to minimize overstocking or understocking. However, the methods involved each have their own set of advantages and challenges, and both can have a significant impact on your customer satisfaction levels. Let's dive into the pros and cons of each to help you determine which approach might be best for your fulfillment logistics.
Year-End Inventory Count
What is a Year-End Inventory Count
Year-end inventory counting, also known as a year-end physical, involves performing a comprehensive count of all stock at the close of your fiscal year. This is a traditional approach that tends to be common across many industries, especially for financial reporting purposes.
Pros:
- Comprehensive Snapshot
- Provides a complete picture of inventory at a specific point in time, which can be useful for financial reporting and audits.
- Simplified Accounting
- Aligns with the fiscal year-end, making it easier to reconcile inventory with annual financial statements.
- Traditional Approach
- Familiar process for many businesses, with established procedures and practices.
- Short Term Cost Efficiency
- Fewer counts can mean fewer labor hours and resources allocated to inventory management throughout the year.
Cons:
- Operational Disruption
- Requires significant downtime, often putting a pause on your regular shipping and receiving schedule, thus causing delays. This shutdown time can lead to potential delays in order processing and fulfillment, ultimately frustrating your customers.
- Increased Risk of Errors
- Relying on a single annual count leaves more room for errors caused by inventory shrinkage, misplacement, or unrecorded transactions over time.
- Reactive Problem Solving
- Errors or discrepancies during the count can reveal long-standing issues that could have been caught and corrected sooner with a year-round cycle counting program.
- Resource Intensive
- Demands a lot of time and manpower for a short period of time, often resulting in overtime costs.
Year-Round Cycle Counting
What is Year-Round Cycle Counting?
Year-round inventory counting involves frequent, smaller-scale counts, often through cycle counting – a process that divides inventory into segments counted on a rotating basis.
Pros:
- A More Proactive Approach
- Regular counts enable your team to identify and address discrepancies quickly.
- Improved Accuracy
- Continuous monitoring on smaller scales reduces the likelihood of inaccuracies, ensuring more reliable data for your fulfillment logistics planning.
- Enhanced Efficiency
- This method spreads the workload throughout the year, minimizing disruptions to daily operations. This means no downtime: your warehouse can keep running smoothly, ensuring timely order fulfillment and happy customers.
- Better Resource Allocation
- Year-round inventory counting avoids the year-end rush and overtime costs, optimizing staff scheduling and utilization.
- Flexibility
- Cycle counting can be completed in different ways to best suit your business. Many businesses use the ABC method: Products are categorized by velocity so that your fastest moving and/or most valuable SKUs (Group A Products) are counted more frequently.
- Increased Inventory Visibility
- This approach provides real-time data for better decision-making, forecasting, and demand planning.
- Reduced Risk of Stockouts and Overstocks
- Timely adjustments to inventory levels enhance customer satisfaction and service levels.
Cons:
- Initial Setup
- Requires planning and preparation to establish a cycle counting schedule and train staff.
- Continuous Effort
- Demands ongoing attention and regular audits to maintain effectiveness.
- Labor Costs
- More frequent counts require ongoing resource allocation, which may increase labor costs.
- Technology Investment
- Year-round cycle counting is most effective when supported by an advanced warehouse management system. It may also require investment in inventory management software and tools like barcode scanners or RFID technology.
Shifting from a year-end count to a year-round cycle can be challenging. However, partnering with a 3PL that already employs this method means they already have training in place and the technology know-how to bring you into this process without all the potential headaches.
What’s Best for your Brand?
When weighing the pros and cons, it's clear that both inventory counting methods have their merits. However, if you have the resources and expertise on your side, the benefits of a year-round inventory counting cycle are significant. This proactive approach avoids downtime and leads to improved accuracy, enhanced efficiency, and better resource allocation.
Inventory Counting at Motivational Fulfillment & Logistics Services
At Motivational, we're pleased to offer both inventory counting methods. For our customers who opt for a year-round cycle counting inventory process, we employ the ABC method, and our customers have been delighted with the results. For our customers who prefer a year-end physical count, we are dedicated to helping them reach their inventory goals each, even if it means overtime or even weekend shifts.
Even better, no matter which inventory method your business prefers, all of our customers benefit from our enhanced cycle counting efforts. We conduct cycle counts throughout the year across our business, which means, even if you don’t have a dedicated cycle counting person or team, you’ll still get a regular inventory check-in as we work to continuously maintain and improve our accuracy and efficiency.
Ready to optimize your inventory management? Let's talk!