Fall 2011 issue of Horizons

Many ERP systems have inventory management modules with built-in cycle counting programs that can be customized to accommodate a single or a combination of counting methodologies. These systems can also reconcile cycle count data, and track trends in order to assist in the root cause analysis process. Another effective use of technology is the use of automated data collection (ADC) software, which can interface well with your company’s ERP system (e.g., RF-SMART for JD Edwards or Microsoft Dynamics). Using this type of radio frequency (RF) technology, the cycle counters use hand-held scanners to scan barcodes, which are automatically recorded by the data collection software and interfaced with the ERP system. ADC eliminates some of the inefficiencies in the paper process associated with a standard cycle counting process while also increasing the count accuracy by eliminating the human error factor. Overall, your company is reducing time recounting and reconciling data to the ERP system inventory balances. This type of system is sometimes referred to as a line-of-sight system and still requires that pallets, boxes, and items be pulled down from racks with forklifts, cubes of products un-stacked and moved, bins emptied, etc. in order to count all of the items of a particular stock-keeping unit (SKU). As technology continues to advance, more solutions continue to be developed and offered, such as Radio Frequency Identification (RFID), which allows a large group of items to be counted simultaneously (field-of-view method). RFID eliminates the need to move any products, which enables large quantities of inventory to be counted in an instant, resulting in a highly accurate count with minimal time and effort required.

No matter how simple or technologically advanced your inventory management is, there are certain pitfalls that can derail any cycle counting program. Always be sure that your cycle counting program is formalized, that inventory ownership/responsibility is well defined, cycle counters are properly trained using all tools and techniques deployed, and that any new system is thoroughly tested prior to a go- live event. Technology has and will continue to influence cycle counting programs in the years to come. Therefore, cycle count programs should be evaluated periodically to determine whether they are providing the most effective and cost beneficial results to your company. Could LIFO Be Eliminated? The tax proposal to eliminate the last-in, first out (LIFO) inventory accounting method included in President Obama’s 2012 budget (though it was not a part of the final budget) caught the attention of many manufacturing and distribution business owners.

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