Taking inventory is part of the basic process of responsible business management and control. By periodically conducting a physical count, it is possible to make sure that all relevant items are properly accounted for, and that current documents related to the value of the inventory is accurate. Here are a few of the different ways companies have managed this type of materials control over the years.
One time-honored approach to taking inventory is known as a cycle count. Used for many years in textile plants, this approach called for conducting regular physical inventories of a portion of the materials stored in plant level supply stores. Many textile companies manage their supplies by using what is known as material codes, which is simply an easy way to categorize various components and materials that are associated with the function of a given department in the plant.
A typical cycle count would identify a limited number of material codes to inventory each calendar month. The selected material codes would be subject to a physical count, with each unit of each item listed under those codes physically counted. The result of the cycle count is compared to records kept of the receipts and issues of those items, and any differences between the two are noted and reconciled. Cycle counts are usually structured to allow the entire inventory to be physically counted over the course of the year, and can often make the process of doing an annual full stores materials reconciliation much easier.
Thanks to the use of modern software, it is also possible to quickly take inventory of a selected group of items with great ease. For instance, generating a printout of the amount of office supplies that should be on hand is very simple. The printed report will reflect how much of each item should still be awaiting issue to a given department, as of the date the report is pulled. This approach does require that all receipts and issues be recorded in the database before the report is generated; otherwise, the count will be off.
Many companies employ a process that relies heavily on the use of FIFO and LIFO. Acronyms for first in last out, and last in first out respectively, this type of inventory management relies on accurately recorded when items arrive, and when they are disbursed to a given department within the company. With this approach, the remaining units of a given item are physically checked after the day’s receipts and issues have been entered into the supply chain database. This process often allows small businesses that need to keep inventories to a minimum for tax purposes to always know exactly what they have on hand, and to take action if a significant amount of a given item cannot be accounted for.
Inventory processes can be very elaborate or very simple, depending on the needs of the company. By choosing the right type of tracking system and software, and being diligent in physically counting units on a regular basis, it is possible to make sure that the materials records are kept accurate at all times. This makes valuing all types of inventories, ranging from raw materials to finished goods, much easier than it would be otherwise.
