What is cycle counting in inventory management and what is its main benefit?

• A. A one-time comprehensive count of all inventory
• B. Verifying supplier invoices
• C. Regular, scheduled counting of a subset of inventory to adjust records; benefit: improves accuracy and reduces stockouts
• D. Counting payroll

Answer: (C)

Cycle counting is the ongoing practice of periodically counting a subset of inventory items and adjusting the ERP or inventory records to match what you actually have on hand. Instead of doing a single, big physical count of everything once a year, you break items into groups and count them on a rotating schedule. This keeps data fresh and helps catch and correct discrepancies as they occur.

The main benefit is improved accuracy of inventory records, which directly supports better ordering and fewer stockouts. When records reflect reality more closely, you can reorder the right quantities at the right times, reduce unnecessary stock, and identify issues in receiving, data entry, or shrinkage early. It’s common to prioritize items by value or turnover (the high-impact items) for more frequent counts, which further enhances control over the most critical stock.

The other descriptions don’t fit cycle counting because they refer to a one-time full-count approach, or to activities outside inventory control (like verifying supplier invoices or payroll).