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A physical inventory is done once a year to check and correct the accuracy of your inventory. Often used by banks to audit their investment into your company or to simply reset your stock levels so that inventory is correct and customer service is not impacted by wrong information. A cycle counts purpose is to find systemic problems, it is NOT intended to ensure your inventory accuracy or fix your on hand quantities. Those are mere bi-products of a cycle count. All inventories will have different classification of products called A,B,C,D classification. These classes are defined by the criticalness and movement of a product where an A item is high dollar / high mover, and a D item is something that is identified by the dust it has on the shelf. A cycle count filters through your inventory over a course of a year. A company may choose to count all their A items 4 times a year, B items3 times a year, C items twice, and D once. The theory behind the Cycle Count is to monitor your systems (processes and proceedures). Are you pulling parts correctly, are they marked correctly, is paperwork being processed, is the receiving dept. counting items on the inbound, are product bar coded correctly, is a bill of material correct, theft, and a hundred other things that could possibly cause your inventory to go out of balance. A cycle count finds those flaws and offers you a chance to correct them. The reason an A item is counted more often than a D is not because of Value $$, yet because it is subjected to your processes a lot more. Assuming you have a very solid system/process, you constantly test it (via Cycle Counts), and you apply that same exact process to an A item as you do a D, there is a very high probablility that your inventory accuracy on the D item will be as accurate as your A, even though you only counted it once in a years span. Lastly, a good cycle count has a Hit of Miss criteria. There are always going to be acceptable levels of tolerance. Simply put, do we really care if we are off by 1 or2 pcs. of a $0. part that we stock THOUSANDS of? NO! So we identify those tolerances. If your counts fall with in those tolerances, you have a HIT (good thing). IF they fall outside of the tolerance you have a MISS (bad thing). Misses are investigated. Problems researched and solutions secured. THEN as a final measure you would schedule the MISS for a future cycle count, say in a couple of weeks to ensure the fix worked, the process is functioning and the system is good.
-cycle count can be done on daily, weekly, monthly, quarterly basis etc depending on ABC categorized stock.
-Stock take is an inventory that is normally done once a year
