Construction

Cycle Counting in the Construction Industry

August 1, 2023 • 7 min read

Cycle counting is one of the most effective methods to count stock for any business that tracks inventory, materials, parts, or supplies. And in the complex construction industry, cycle counting isn’t a nice to have—it’s a must. 

What is Cycle Counting?

Cycle counting is an inventory management strategy to count a stock subset in small increments instead of the entire inventory. Cycle counting provides efficient checks and balances for accounting records to match what is physically in the warehouse to find discrepancies, resolve issues, and increase future accuracy.

For example, a building company may keep hundreds of parts, tools, and equipment in stock. Keeping track of all inventory can be a  huge challenge. Cycle counting helps by focusing on smaller increments on a regular, rotating schedule. Eventually, all the stock is added up, without the heavy lift of one massive count. 

Some key advantages that construction and service providers gain from cycle counting:

  • Provides a reliable, accurate, and efficient method for an inventory count
  • Identifies inventory discrepancies to resolve with accounting records 
  • Minimizes warehouse operations interruption by counting a stock subset
  • Detects lost, damaged, or stolen items in the full inventory

The Need for Cycle Counting in Construction

Construction businesses have hundreds of inventory items to track every day, such as heavy equipment, building materials, tools, components, and other stock. Needs can change on a dime, from bad weather, to permit delays, or other unexpected adjustments. These can slow down the timeline, project productivity, as well as quality. 

Cycle counts work most efficiently for: 

In-demand items

Knowing the most common inventory items is essential. For example, an electrician needs to have electric tools, pliers, and other commonly-used items for most customer visits. Without accurate inventory information, it can mean missing parts, trips to the store, or even losing jobs to the competition.

 Tracking costly stock

Construction materials like copper wire or steel are higher-ticket items considered more valuable. Cycle counting these items regularly can ensure they’re always available for upcoming projects.

Infrequent items

Conversely, there may be items that aren’t used often but should still be in stock. For instance, a plumber may rarely need to install a garbage disposal, but not having it on hand could result in a loss of business and an opportunity for a marked-up item.

Experience the simplest inventory management software.

Are you ready to transform how your business does inventory?

Implementing Cycle Counting in Construction 

Adopting cycle counting in the construction industry requires a manageable, streamlined process. Depending on your business size, complexity, and other unique factors, the steps below may be slightly different. 

1. Set objectives

Preview the entire inventory and make decisions about which stock you’re counting based on seasonality, in-demand items, and other criteria important to your business.

2. Establish planning and ordering

Develop an inventory cycle count schedule weekly, monthly, bi-monthly, or at other intervals. Once the timeline is established, communicate it to the team. Cease warehouse activities such as removing or restocking during this time.

Order more than enough count tags to account for any errors. Sequentially label count tags to accurately track information about products, such as part number, location, quantity, and condition.

3. Assign responsibility and schedule

Typically, one team will count all physical inventory and another will record the findings. Break inventory team into groups, as needed. Distribute tags and clarify what each group should count.

4. Analyze data

There are four common ways to conduct cycle counting:

ABC analysis: Also known as the 80/20 rule, Category A items are 20% of your stock, and 70% of your inventory value; Category B: 30% of inventory and 25% value. Category C: is 50% of your inventory, but only 5% value.

High-Usage Cycle Counting: Items moving the fastest should be counted more frequently, especially when they’re expensive assets.

Control Group Cycle Counting: This cross-checks if results are accurate. Inventory should be counted several times during cycle counting intervals to determine any errors in stocking,  labeling, or other issues.

Random Cycle Counting: This method is very effective if you have a lot of similar inventory, say, a certain size of piping.

5. Take corrective action

Whichever method you use, the count may show accounting records and physical inventory aren’t matching. An inquiry should be made to determine the cause. Resolve the discrepancy with accounting records and continue to monitor the inventory item for the next cycle counts to recheck that it doesn’t occur again.

Technological Enhancements in Cycle Counting

Cycle counting is a reliable way to keep tabs on inventory and flag issues early. However, all of these manual processes add time, resources, and effort—and errors. Digital inventory management systems, barcoding, RFID, and other tech solutions offer companies a competitive advantage.

Inventory apps like Sortly help manage inventory without worrying about manual errors, allowing construction companies to:

  • Access and update inventory information instantly from any device (smartphone, tablet, or computer)
  • Scan barcodes and QR codes to check items in and out, update levels, or other tasks
  • Create customized inventory details for each stock item based on what’s most important, such as photos, attachments, and other data.
  • Generate cycle counting, inventory forecasts, and other customized reports with actionable insights
  • Set alerts to know when an item is running low or approaching expiration or warranty end
  • Enable customized access based on role

 

How cycle counting can pay off

Construction companies of all sizes and specialties have adopted cycle counting as part of their inventory management strategy for efficient inventory operations. The main benefits include:

Continuing warehouse operations

Shutting down for a length of time for a full physical inventory count is an expensive and time-consuming endeavor, including employee overtime costs

Increasing inventory accuracy

The cycle counting method yields more reliable records than full inventory counts

Detecting problems faster

Uncover inventory issues in real-time such as obsolete stock, theft, and potential write-offs.

Increasing revenue opportunities

An accurate inventory count allows sales to confidently take on new work without concerns about delays or other issues

Challenges in cycle counting

There are many advantages to cycle counting, but it’s not a perfect science. You may have a well-coordinated process, but ERP records may still not match physical inventory after cycle counting discrepancy resolution. Ultimately, it can have a domino effect on warehouse productivity, project timelines, revenue, and even your reputation. Some of the causes include:

Irregular cycle counting

Stick with a schedule—no matter what. For example, an HVAC distributor may get a burst of business or be short-staffed and end up skipping a count. This can have longer-term effects.

Inefficient cycle counting processes

If the process isn’t well-coordinated among warehouses and other inventory locations, there can be stock mismatches,  job delays, and other consequences.

Ways to optimize cycle counting

There are some best practices to make the most of cycle counting.

  1. Conduct one cycle count at one time. Reducing the number of inventory counts increases accuracy and lessens the impact on your entire team to focus on their responsibilities.
  2. Put employees on the job that are reliable and detail-oriented, otherwise, you might need to recount.
  3. Determine items move the fastest from the warehouse, and prioritize the fastest to slowest for future cycle counts
  4. Document the entire process, any changes that are made, and streamline as you go. Inventory management software can help automate this and provide historical reporting.

Conclusion

Cycle counting is an effective strategy to manage inventory in the construction industry. Following these guidelines and tips can help you get the most accurate results and fast resolution. 

With the help of inventory management systems like Sortly, construction companies can gain efficiencies to improve their overall inventory operations, including cycle counting. Sortly brings all your inventory needs into one powerful platform and lets you organize, customize, track and manage construction inventory—from any device, in any location. We help you plan and deliver jobs better, save costs, and serve your customers to their highest satisfaction. If your construction team would benefit from improved inventory management, try Sortly free for 14 days.