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What Is Warehouse Inventory Counting?

Ian Smith

Let's start by first answering the question: What is warehouse inventory counting?

Inventory counting is a process for validating and reconciling the amount of inventory that you have in your warehouse at any given time. Having the correct inventory count is critical to customer satisfaction in addition to all the financial implications of holding too much inventory or not turning inventory fast enough. Those are three KPI's that I am sure you are familiar with.

There are two generally accepted methods for inventory counting:

  • Physical inventory count - a systematic, physical inventory counting process

  • Cycle count - a sampled inventory process that uses statistical methods to predict actual inventory levels


Both of these methods have pros and cons that enable a warehouse manager to determine which method is the best fit for a given facility at a given point in time.  A physical inventory process requires that you shut down the warehouse and physically go through and systematically count all of the items stored in the warehouse. Physical inventory counts might be needed at least once a year, for tax and end-of-year accounting purposes. Alternatively, a cycle count method enables you to count a smaller subset of items within the warehouse without needing to shut down the warehouse and count everything. Cycle counting uses statistical methods to determine the overall inventory accuracy through the sampling of a smaller set of items.

PROS and CONS For Inventory Counting Methods

PROS: CONS:
Physical inventory count You end up with actual inventory data for all items in the warehouse

Fulfills tax/accounting reconciliation requirements

Can identify areas of theft, negligence or incompetence in your warehouse staff
— Warehouse is shut down during the process (no shipping or receiving)

— May require a large team to inventory quickly (depending on number of SKUs)

— Requires that you pull in additional staff for the count and train them on the process

— Expensive
Cycle count — Warehouse can continue to operate during the process or shut down only for a short period of time

— Can focus on suspect or inventory problem areas

— Can happen on a periodic or ongoing basis in near real-time

— Can be done with a dedicated team
— Output for the overall inventory count is an estimate, based on statistics

— Can miss inventory problems that include theft or incompetence, unless suspect items are counted

— Long cycle times for full coverage compared to automation systems like drones

— Labor intensive


Cycle Count As A Best Practice

In a large warehouse, a physical inventory count can be time consuming, and the time that it takes to perform a complete physical inventory may take the warehouse out of production for too long. If you can't afford the downtime for a physical count, cycle counting might be the best solution. A cycle count can be performed more frequently and without negatively impacting warehouse operations.

There are a variety of different cycle count methods. The goal of each cycle count method is to count a subset of "things" and then extrapolate the results to the broader inventory pool. One method focuses on counting high-value inventory SKUs, while another method targets high-turnover SKUs.  There are also a variety of hybrid cycle counting methods that use a combination of counting strategies. At the end of day, a cycle count attempts to first validate the accuracy of your warehouse management system of record. It subsequently updates the inventory estimates of items not counted using the inventory trends identified by the items that were counted.

As warehouses become more automated, there are new opportunities to automate the cycle counting process. If you deploy a goods-to-person automation process, then some form of automation (mobile robot or automated storage and retrieval) will acquire and bring totes/bins/boxes of SKUs out of storage to a singulation point. As individual items are picked for shipment, the storage unit can be tagged for an in-process cycle count before it is returned to the storage location. This is just one example of how warehouse automation is evolving to help improve the fulfillment process.

Once you implement cycle counting, you will also want to rotate the target items that are being counted.  A common best-practice is to ensure that every SKU is cycle counted at least once per quarter. This includes over stock items and reserve locations. Worst case, you might have a large, multi-level warehouse where items can carelessly get misplaced. This can lead to apparent stock outs, that directly impact your business and which might be easily preventable.

The Ware Solution

We've designed the Ware Solution to directly help with the process of inventory counting, but to do it in a hybrid manner. By leveraging the mobility of drones, Ware allows you to scan your entire warehouse as often as you need. The data gathered by Ware drones becomes a permanent record of the state of the warehouse at a given point in time. Ware drones autonomously fly through your warehouse and image all of the pallets and SKU storage locations. They can even operate overnight, while the warehouse is idle and/or sparsely occupied.

Once the image data is collected, it is analyzed with artificial intelligence to identify barcodes and other labels seen in an image. From that information, the system can quickly determine both the location of the item in the warehouse as well as estimate the amount of the inventory seen. The Ware drones know exactly where they are in the warehouse, and this enables the drone to reconcile what it sees with the inventory information held in the warehouse management system or your ERP.

We have some customers today who are deploying the Ware solution to help inventory all of the upper level, bulk storage locations. These are areas that are difficult to reach or may take time to get to for cycle counting. In ten minutes, a Ware drone can inventory a region of the warehouse that might take a human a couple of hours to count. One Ware customer immediately saw the value in the solutions when a Ware drone was able to quickly find the location of a missing pallet of high value SKUs that had been misplaced for weeks within the warehouse.

Conclusion

Every warehouse manager understands the business value of accurate inventory counts. Every warehouse manager also feels the pain that it takes to maintain accurate inventory and the operational disruption to perform an inventory count. Ware Robotics has developed a new solution for putting inventory control back in the hands of warehouse managers by automating a holistic data acquisition process without impacting day-to-day warehouse operations.