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Cycle count
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==Method== There are several methods of selecting which items to count and with what frequency, and each method has strengths and weaknesses. ===Pareto method=== The Pareto method, derived from the [[Pareto principle]], is to cycle count inventory by percentage of inventory value. Items with a higher determined value are counted more often, while items that have little movement are seldom counted. This approach is usually based on value which appeals to [[accountants]] by minimizing the variance in inventory value. The analysis may also be based on usage from an operational point of view. This is perceived as being more efficient from a [[supply chain management]] perspective by concentrating effort on higher volume of use items.<ref>Essentials of Inventory Management, by Max Muller (p.188)</ref> The main shortcoming is that low value items may be ignored and cause an entire [[assembly line]] to halt while a minor component is re-ordered. ===Hybrid=== There are also hybrids of the ABC method. The most common would be to use [cost*usage] and adjusted based on certain criteria that's critical to the organization's performance. ===Cycle counting by usage only=== Cycle counting by usage states that items more frequently accessed should be counted more often, irrespective of value. Every time an item is added or removed, there is a risk of introducing inventory variance. Logical inventory zones can be set up to distinguish items depending on how frequently they are touched. This method may be biased against counting higher value inventory or require additional counting to satisfy accounting requirements. ===Opportunity based=== This method conducts inventory checks at key points in the material management process. The inventory is audited at re-order points, when a certain amount is used, or when inventory levels are low. ===Statistical Process Control=== This method uses statistical process control to audit items with the highest chance of inventory inaccuracy. ===Geographic=== Also known as "location based" or "by surface area". Cycle counting that begins from one end of the company to the other. Combing over each rack or shelf, that is assigned per counter. This method may require planning, in which a map of the company is required and counting forms for the recording of stock information that will then need updating to the inventory management system.
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