Cycle Counting – What Really Counts?
Traditional measures of accuracy can be a double-edged sword. While their objective is to confirm cost or inventory accuracy, these methods often serve as a disincentive by inadvertently discouraging an all-out effort to find and eliminate the real root of the problem. When too many inaccuracies are found, the company’s calculated inventory accuracy drops, and this reflects poorly on the worker or workers responsible.
In this instance, the manufacturer needs to understand that inventory accuracy is only an indicator of performance and is not a true measure of the actual process. By definition, performance measures track a process, but something must have been performed in order to have a performance measure. Cycle counting is a process and has a performance measure related to its effectiveness.
Traditionally, companies judge a cycle-counting process based upon a measure of inventory accuracy. The more the process confirms the accuracy of the company’s inventory, the higher the process’ measure of effectiveness – or so it would seem.
Challenging The Traditional Measures
Consider the results of the cycle counts shown below. The mix of counts is representative of the category mix in order to suggest a level of inventory accuracy across all parts. Compare the total calculated accuracy of 98.7% with the following weighted calculation (there is more than one way to calculate accuracy): (more…)