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What type of Cycle Count Method Do You Use?

ed_bunn3
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Hi SAP Team,

Today, we are leveraging SAP WM cycle counting process with A,B,C frequencies where A's are counted more frequently then C'’s. This leads to a heavy burden on counting A's frequently but also C's especially if they have a procurement strategy to be received in more frequently due to their part size and special needs regarding handling and storage. Every time a new part comes in a new receipt batches thus new quants are created more than twelve times for a specific part during the year so even though we setup the cycle count frequency to count more than once, by default those parts already will be counted more than once just because of the new quants that are generated.

On to my questions, I was curious what best practices were being leveraged by other discrete manufacturing companies? Are you using one or a combination of the following processes? Have you had any issues with option A or B from an audit compliance perspective that caused you to customize the standard processes to satisfy audit as well as reduce the counting for the inventory team?

A. WM Cycle Count Processes @ Quant Level (LICC)

B. WM Cycle Count Process @ BIN Level (LX26)

C. Continuous Inventory to count every BIN throughout the year (LX16), Reset BIN to start counts over in New Year.

D. Full Physical Inventory at Year End (LX15)

I myself was leaning towards the continuous inventory process but, did not know if other industries were using that over a traditional ABC count methodology at the quant level? Or were possibly using LX16 for compliance and LICC for operational performance reasons.

Thanks,
Ed

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Answers (1)

mauricio_tello_gelpud
Active Participant

Hello Ed,

Notice that when you configure the frequencies, there's a calculated field that indicates the amount of days between each count and the frequency you setup is controlled by quant.

If you have 12 quants for a material that is supposed to be counted once per year, or in other terms each 365 days, the system will take the last inventory date from each quant and calculate the date when it should be counted again, 365 days after, but each quant may have a different last inventory date, therefore each one will be scheduled to be counted in different days. It might sound like you're counting 12 times the same material during the year, but actually you've only counted it once but it was spread in 12 bins or 12 batches or whatever.

I think it's important to understand the differences of those transactions, and that will help you defining the best procedure for your company.

Cycle counting is a complementary procedure with the purpose to help you keeping your stock accurate and minimize the amount of differences to be found at the formal year counting. SAP offers two transactions to trigger it:

A. WM Cycle Count Processes @ Quant Level (LICC): The system will immediately activate the inventory document and therefore the quants are automatically blocked for inventory as soon as the document is created. The nice thing about this transaction is that it only locks the quant, not the bin, which is very useful if you have mixed storage.

B. WM Cycle Count Process @ BIN Level (LX26): The difference compared to LICC is that the inventory document is not created for specific quants but for the storage bin and the document can be created with inactive status. If you have mixed storage, then this transaction is not suitable because it will identify that one of the materials in the bin is to be cycle counted but it will create the inventory doc covering the full bin contents and you will end up counting stuff that was not necessary.

Then we have the main procedures that are to be agreed with auditors. Only one of them can be implemented per storage type.

C. Continuous Inventory to count every BIN throughout the year (LX16): In this procedure it is not necessary to count all bins at the very end of the year, instead it allows the counting process to be performed during the year, whenever it fits best, and using different parameters for the selection. You can choose for example to count bins with less than certain amount of stock, and in another run to count only empty bins and so on. Then, at the end of the fiscal year, only not counted bins during the year will be reviewed using the very same transaction but with no restricted selections apart from "not yet counted". That way you can distribute the counting effort but it needs to be agreed with auditors. Some of them don't allow inventory counting with different dates along the year. You can also activate zero stock check and placement inventory as an addition to continuous inventory.

D. Full Physical Inventory at Year End (LX15): I would say this is the basic procedure that every warehouse should use as a minimum. The bins are counted at the end of the fiscal year and they are selected regardless their content, which is the biggest difference comparing to continuous inventory. Due to the amount of documents that can result, the transaction creates the inventory documents using a background job. Storage types must be blocked for inventory before creating the documents, using transaction LI06.

In conclusion, yes you can use LX16 for compliance, as long as auditors accept it, and LICC as a complementary procedure.
I hope you'll find this useful.

Regards,

Mauricio Tello Gelpud