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Cycle Counting

Cycle counting is a method of counting inventory by grouping products into classes and counting the products in each class at designated intervals over a period of time. Only part of the products are counted at one time, but over the designated time period all products are counted. Products of class A, for instance, might be counted once every three months, products of class B once every six months, and products of class C once a year.

Since assets are moving in and out of inventory, cycle counting creates a dynamic, statistical view of inventory. To enhance statistical accuracy, cycle counting uses two methods of product classification (the cycle count basis): ABC and XYZ.

  • The ABC cycle count basis ranks products according to their financial value. The Cycle Counting Engine counts the items with a larger dollar value more often than those with a lower value.
  • The XYZ cycle count basis ranks products according to their turnover. Higher-turnover products are counted more often, resulting in a higher accuracy of counting.

Cycle counting is configured for inventory location types, inventory locations, and products.

NOTE:  If a configuration parameter for cycle counting can be set at different levels, the parameter for the more specific level takes precedence. For example, the cycle count basis (ABC or XYZ, meaning cycle counting based on the value of items versus their turnover rate) for an inventory location takes precedence over that for an inventory type. The cycle count class, A, B, or C; X, Y, or Z (meaning that it has high, medium, or low relative value or turnover rate), for an inventory type takes precedence over that for a product.

The Cycle Counting Engine requires this input:

  • One or more inventory locations
  • A start date for creating inventory lists for cycle counting
  • An end date for creating inventory lists for cycle counting

Whenever the Cycle Counting Engine runs, it produces the following output:

  • Cycle counting periods, which define the calendar dates covered by a cycle count.
  • Cycle counting records (headers).
  • Part lists for each cycle counting record. The part list provides instructions for the next physical count of inventory.

The Cycle Counts screen, Part List view accepts manual input of the count data. The Cycle Counting Engine compares this to the inventory records in its database, and, if there is a variance, allows for an adjustment of inventory.

Figure 35 illustrates the decision path that the Cycle Counting Engine uses to generate a parts lists. In following the decision path, the Cycle Counting Engine goes through the following steps:

  1. Identifies the cycle-counting basis (ABC or XYZ) for the specified inventory location or location type.
  2. If any remaining product category is to be handled, calculates the number of products to count today. If no remaining product category is to be handled, prints a parts list.
  3. If there are any remaining uncounted products in the category, selects a product category that has not been counted in this counting period.
  4. Adds the selected product to the parts list (or cycle counting order); flags the product counted.
  5. If the products to be counted today have been selected, returns to Step 2. If the products to be counted today have not been selected yet, returns to Step 3.
Figure 35. Logic of the Cycle Counting Engine
Click for full size image
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