This is brief overview for implementing cycle counting process in inventory management (IM).
Cycle counting is a method of physical inventory whereby inventory is counted at regular intervals within a fiscal year. Physical inventory may be required by financial accounting rules or tax regulations. Cycle counting process is less disruptive to operations. This process can be integrated in daily operations, for e.g., count 200 materials at beginning of shift (20 people counts 10 materials each).
Cycle Counting allows you to count fast-moving items more frequently than slow-moving items.
Cycle counting process is fairly easy to implement. This process increases accuracy of inventory.
No. of phys. inventories per fiscal year for cycle counting: Specifies how often during the fiscal year a physical inventory is to be carried out for a material subject to cycle counting. This parameter will convert count interval in work days.
Interval: The count interval is determined automatically on the basis of the number of physical inventories specified for the fiscal year.
Float time: Indicates the number of workdays by which the planned count date may vary from the current date.
For the plant 3000, the float time is five days. A physical inventory has been planned for a material belonging to category C for June, 1. On expiration of the float time (after June, 6), the physical inventory has not yet been carried out. Irrespective of the category, the material is parked for the next cycle counting run.
Percentage: Specifies the percentage allocation of the materials to the individual cycle counting categories. The percentage value is used for automatic assignment of the cycle counting indicator during ABC analysis.
Settings for physical inventory
- Change documents are activated for physical inventory document.
- The book inventory balance is adjusted in the physical inventory.
- Serial number management is setup. In the above example, last five digits of serial numbers will be printed on physical inventory document.
1. Cycle counter indicator set for the material’s plant data 1 tab. (Tcode: MM02)
This means that the cycle counting indicator cannot be changed for cycle counting by an ABC analysis.
Execution / Process flow chart
Restrict selection based on Material number, storage location, Material group etc.
In addition to unrestricted-use stock, you can include stock in quality inspection and blocked stock in the selection.
By specifying a threshold value, you can define that only stocks above or up to a particular level are included.
Indicates that no goods movements involving the materials listed in the physical inventory document can be posted for the duration of a physical inventory count.
The indicator is set for the affected stocks in each case (storage location stock, batch stock, or special stock), for all associated stock types and is not cancelled until the count results are posted.
The blocking indicator can be setup in one of two ways:
• Directly upon entry of the physical inventory document (if the count is to take place immediately).
• Shortly before the count (if the count is to place later).
It specifies the book inventory balances of those items in a physical inventory document that have not yet been counted and are frozen. This indicator has the effect that the current book inventory balance is recorded in the physical inventory document. The system compares the counted stock with the frozen book inventory balance to determine any inventory differences. If the count results are not entered immediately after the stock has been counted, it is useful to set this indicator so that any goods movements which may take place in the meantime will not change the book inventory balance relevant to the physical inventory.
For example: Business process is to count inventory before shift begins, and then after few hours inventory administrator enters counts. In this case do not set ‘Posting block’, as production will need to perform goods issue. In this case set ‘Freeze book inventory’, so inventory count will be measured against inventory at the time when physical inventory documents were created.
Output will have all materials for which physical inventory documents can be created.
It then lists the stock management units for which a physical inventory is already active, but has not been completed within the predefined float time and therefore must be completed urgently. These stock management units are not included when the batch input session is created because active physical inventory documents already exist.
In addition, the list contains all materials for which cycle counting is required within the planned interval (specified interval for the planned count date). If a physical inventory had already been due prior to the planned interval, the planned count date would be highlighted.
The remaining steps are self-explanatory. Inventory reference number can be used for the rest of the transaction to complete cycle counting process.
MI21 – Print Physical inventory document
Here you can specify:
MI24 – Physical inventory list
This transaction can be used as working transaction for inventory administrators. User can use inventory reference number to group cycle counting document.
In this transaction user can enter count, monitor progress, run analysis and post counts.
When the inventory differences are posted, the total stock is automatically adjusted to the counted quantity on the document. When the document is posted, the difference will correspond to either a goods receipt of goods issue. This affects following areas:
• Material planning for production or sale orders
• Stock value on balance sheet