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Cycle Counting with a WMS.

By Dave Piasecki


Cycle Counting with a Warehouse Management System has a significant advantage over standard cycle count programs without a WMS.

Warehouse Management Systems (WMS) are assumed to have directed tasks and use portable computers with bar-code scanners (or similar technology) to execute these WMS tasks. This results in real-time transactions that affect location-level on-hand inventory balances. While not every software program claiming to be a WMS will have this, most will.

This means that even if you are attempting to count a very fast-moving item that has orders picked and shipped every day, you should be able to count the item/location at any time, and the WMS will have the current on-hand balance to use to compare your count.
Without the real-time capabilities of a WMS, you would have to figure out which orders were already picked from that location at the time you counted it. This can be very challenging, and this is why cycle counts historically have been completed first thing in the morning before any other activities begin.

Failing to accurately account for inventory transactions that occur during a cycle count is a big reason why many companies screw up their inventory when they start cycle counting.

So let’s go back over how a WMS handles these real-time transactions. Without a WMS, when you pick an item for an outbound order, nothing typically happens. It continues to show as an allocated quantity against the location the item was picked from. Only when the order is completed, either through a ship confirmation step or a batch program that typically runs at night, does the inventory get deducted from the location. Now, a WMS doesn’t necessarily deduct the inventory any sooner, but it does do a transaction to move it out of the location in question. WMSs will typically use temporary staging locations to handle this. So for orders being picked, you may have a location “SHIP” or “OUTBOUND” that the WMS moves the inventory to. It will stay in that temporary location until it is eventually relieved from inventory, which still may be a ship confirmation step or a batch program that runs at night. However, you don’t need to keep track of this for your cycle count of the picking location because that location will always be correct at the moment you count it.
There will be similar temporary locations for other warehouse tasks, such as “REC” or “PUTAWAY,” for items that have been received but not put in a storage location yet.

This functionality is a huge advantage when cycle counting because you don't need to even think about other transactions that are occuring.  You just go to a location and count it. It doesn't matter what time of day it is or if the order pickers are already picking orders. If an order picker picks something from that same location immediately before or after you count it doesn't matter.

In a typical cycle count program without a WMS, the count program will “Freeze” the on-hand quantity at the time the cycle count is created. Software sales people like to brag about this feature of freezing the inventory, when all they are really doing is copying the on hand at the creation of the cycle count so they can refer to it later. They don’t actually freeze anything, nor would you want them to.

A WMS still needs to do something similar, though I doubt you’ll ever hear a WMS sale person mention freezing inventory for a cycle count. But, because a WMS tracks transactions in real-time through the use of portable computers (hand-helds), it needs to Freeze (copy) the on-hand balance at the time it is counted. This is because the cycle-count adjustment transaction may not occur until a verification (recount) or approval step has been executed. In fact, if a recount step occurs, it will have to also Freeze(copy) the quantity on hand at the time of the recount because there may have been activity that occurred between the initial count and the recount.

A WMS may provide the option to just execute an inventory adjustment (if needed) immediately when the first count is executed. I typically wouldn’t recommend doing that, though. Most adjustments should have a recount done just to make sure the first count was correct. You may have options to set tolerances for this (automatically adjust if under X dollars, otherwise, recount).

If you later approve the variance for adjustment, the WMS cycle count program will use the difference between the last counted (probably the recount) quantity and the on-hand at the time of the count to calculate and make the adjustment.
What about those quantities in those temporary staging locations?

You would typically not count those, at least not as a conventional count. However, you do need to monitor those and make sure there are no old quantities in them. A WMS should help out with this by tracking dates associated with those quantities. You should regularly run reports to see any items in these locations older than X days (with X being the max acceptable number of days that an item should be in that staging location) The exact number of days you use will vary based on your processes. For example, if everything you pick today, ships the same day, there should be nothing showing in “SHIP” at the end of the day.

You should also monitor open tasks. For example, everything showing in location “REC” should have an open putaway task associated with it. If it doesn’t, you need to investigate further to determine why there is no open putaway. If the putaway has been open for longer than is reasonable for that process, you need to see what happened to it. It’s possible that it was put away, but the transaction was not executed.

Monitoring items in staging locations and open tasks are necessary maintenance tasks in a WMS. Not just for cycle counting, but for other processes as well. WMSs are highly dependent on things going as planned. You need accurate inventory and accurate WMS data. And things like open tasks and quantities sitting in staging locations can get out of control quickly if you don’t keep up with them. This includes things like replenishment tasks. Replenishment is one of those things that is frequently not given a high enough priority when things get busy.

I’ll again mention that if you maintain your WMS as previously described, there is no need to cycle count the quantities in staging locations. If you don’t feel you have the discipline to maintain everything you need to for a WMS, don’t implement a WMS.

 

 

More Articles by Dave Piasecki.

Dave Piasecki, is owner/operator of Inventory Operations Consulting LLC, a consulting firm providing services related to inventory management, material handling, and warehouse operations. He has over 25 years experience in operations management and can be reached through his website (https://www.inventoryops.com), where he maintains additional relevant information.

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