Managing inventory is a complex challenge that must be mastered, especially as a wholesale distributor.
For this reason, you need to understand the different types of inventory management practices. Since there isn’t a one-size-fits-all approach that makes sense for every wholesale distributor, this will help you find and establish the best types of inventory controls for your business.
Both cycle inventory and cycle stock are tools in your inventory management arsenal that can help businesses maintain the right levels of inventory, lending to your long-term success as a company. Healthy stock levels also ensure that customers get what they want on time, every time.
By shipping products on time, you also increase the likelihood that those customers will return to shop with you again and again. If you fail to deliver, it’s likely those customers will go elsewhere with their business and never return. Cycle inventory and cycle stock can help you avoid such situations and improve your CRR (Customer Repurchase Rates).
In this post, we’ll attempt to explain the difference between cycle inventory and cycle stock to help you determine if either of these practices make sense for your wholesale distribution business.
What is Cycle Inventory?
Cycle inventory is a practice used to verify the inventory you have on hand—otherwise referred to as a cycle inventory count. An inventory cycle count is defined as a physical count of a small sampling of stock to see whether the count you have in your inventory management software is accurate.
Why Cycle Counting is Important
If there is a sizeable differentiation between your physical cycle count and the count in your inventory management software, then it may be time to perform a count of your entire inventory to determine if there’s a greater problem with inventory management, such as human error or inventory shrinkage.
There are several types of cycle inventory counts when it comes to choosing the type of sampling for your count. You may choose to cycle count a product category, a group of seasonal products or high-value items. You could choose to count your bestsellers as those do contribute significantly to your profitability.
Whatever you choose, cycle inventory counts are a simple way to get a snapshot of how well you’re managing your inventory.
What is Cycle Stock?
Cycle stock is defined as the average amount of stock that’s needed to meet regular sales demands, including what your sales team has forecasted. Another way to say it is that it’s the inventory you plan to cycle through during a predefined time period.
You can calculate your cycle count by cross referencing sales data (from the same time period in a prior year) with what your sales team has forecasted (in your inventory management software). Your cycle stock calculation should include this data rather than only considering the average cycle stock of prior years.
Why Cycle Stock is Important
Maintaining cycle stock is a great way to ensure you have your best-sellers and high-margin products in stock. While it’s important to be able to maintain healthy levels of any inventory, practicing cycle stock maintenance can improve your profitability and customer satisfaction by never running out of stock.
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