Lost inventory can cost thousands in missed sales and wasted hours. If your team relies on outdated or once-a-year inventory checks, small errors can quietly grow into major problems. That’s where cycle counting comes in.
By checking your stock in smaller sections throughout the year, you can stay ahead of mistakes and keep your numbers accurate. We’ve seen how this method helps teams save time, reduce risk, and stay organized without waiting for a full inventory shutdown.
What Are the Key Elements of Cycle Counting?
To make cycle counting successful, there are three main steps every warehouse should follow: ABC analysis, proper staffing, and a strong audit process. These elements work together to keep inventory correct and operations smooth.
What is ABC Analysis?
ABC analysis helps you group your inventory by how often it should be counted. It’s the first step in any good cycle counting program.
Here’s how we break it down:
- A items: These are your fastest-moving or highest-value parts. Count them once per quarter.
- B items: These are your mid-range products. Count them twice per year.
- C items: These are slow-moving or low-value parts. Count them once per year.
We usually follow the 80/20 rule. That means 20% of your items likely make up 80% of your sales or inventory value. Those are your A items and should be counted more often.
Key Takeaway: Use your sales data or item turnover to group inventory into A, B, and C categories for a more focused and accurate cycle count plan.
How Do You Plan for Staffing?
Once you finish your ABC analysis, the next step is figuring out how many people you’ll need to get the job done.
Estimate the Time Needed
Start by doing a few sample counts. This helps you understand how long it takes to count certain item types. With that, you can calculate how many total hours it will take to complete your cycle count program for the year.
Then ask:
- How many people do we need?
- Do we have the staff available during regular hours?
- Should we plan for overtime or weekend work?
This planning helps make sure your team stays on track and doesn’t fall behind later in the year.
Pro Tip: Don’t wait until Q4 to review your progress. Check monthly to make sure you’re meeting your cycle count schedule.
Why is an Audit Process Important?
Even the best counters can make mistakes. That’s why having a solid audit process is one of the most important elements of cycle counting.
What Happens When Counts Don’t Match?
Sometimes the numbers from a cycle count won’t match the inventory system. When that happens, you need a second, independent person to double-check the count. This prevents errors from being accepted and ensures your final numbers are correct.
Once verified, the correct count should be pushed to your inventory system for adjustment.
Key Takeaway: Always double-check mismatches and log corrections. This improves trust in your system and keeps numbers reliable for everyone.
Need expert help setting up your cycle counting program? Contact Monarch for a free consultation, and let us help you build a plan that fits your warehouse needs.
What Metrics Should You Track?
Tracking progress helps make sure your cycle counting system works well throughout the year.
1. Inventory Accuracy
This tells you how well your system matches what’s actually in stock. It’s calculated by:
Number of matching items ÷ Total number of items = Inventory Accuracy
This metric shows the overall health of your inventory records.
2. Cycle Count Completion
This tracks how much of your planned cycle counts are finished. It’s helpful to review monthly, not just at year-end.
Completed counts ÷ Scheduled counts = Completion Rate
3. Cycle Count Accuracy
This shows how accurate your cycle counters are when performing their tasks.
Accurate counts ÷ Total counts = Cycle Count Accuracy
Pro Tip: Aim for 100% in both inventory accuracy and cycle count accuracy. Regular checks help you get there.
How Often Should Items Be Counted?
The count frequency depends on how important or fast-moving the item is. Here’s a basic guide based on ABC analysis:
- A items – Count every 3 months
- B items – Count twice a year
- C items – Count once a year
Set these counts into your calendar early and assign staff ahead of time.
Common Mistakes to Avoid
Even well-planned cycle counting systems can run into trouble. Here are a few mistakes we help clients avoid:
- Skipping the ABC analysis: Without it, you may waste time counting low-priority items too often.
- Not planning staffing: Without enough people or time, cycle counts fall behind.
- Ignoring mismatches: Inventory differences need attention, not guesswork.
- Failing to track progress: If you don’t check progress monthly, it’s easy to fall behind.
Key Takeaway: Avoid these errors by building a clear plan, checking your numbers, and keeping a consistent schedule.
Conclusion: Start Strong and Stay Consistent
The elements of cycle counting are simple, but they require planning and follow-through. ABC analysis, staffing, and audits are the building blocks. Add tracking and metrics, and you have a system that supports real inventory accuracy.
At Monarch, we’ve helped teams reduce lost inventory, improve reporting, and avoid year-end headaches. If you’re ready to build or improve your cycle counting system, we’re here to help.
Call us today to schedule a free consultation and take the first step toward more accurate, stress-free inventory management.
