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Which Annual Inventory Counting Method Should You Use?

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Businesses run into the dilemma of doing a yearly wall-to-wall inventory and have asked “What is the best method for doing this within Microsoft Dynamics AX?”

There isn’t a “One Size Fits All” answer.

The most common method of conducting an annual inventory count is to use the Cycle Count Journal to enter and post your physical inventory. BUT… if you are using counting groups and last counted dates, this method can cause a dilemma.

Method 1: Use the Cycle Count Journal

You can directly create a cycle count journal for ALL items within your warehouse.  The same principles would apply to cycle count history in that the system will mark the date, from the line, as the last counted date.  If you are using counting groups and last counted date to generate your cycle count data, it may not be conducive to use a cycle count journal posting since it will affect the last counted date.

You can use the cycle count journal, up to the point of reconciliation and then export the lines that need to be adjusted, into another journal, such as movement, and make the adjustments there.  By using the value found in the “Quantity” column of the journal, this would serve as the amount that needs to be adjusted (+ / -).

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Choosing the right method and the correct input is a business decision.  Utilizing Excel Imports, Atlas and scanning tools, to name a few, can make the process go smoother.

Method 2: Use Tags (Blind Counting)

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If you are using tags to count with, you can use the tag journal to first control your counts.  How you would like to organize the tag journals is a business decision.  Keep in mind that a tag journal becomes a cycle count journal once it is posted.  No transactions are created for lines in a tag journal.

The following are some suggestions for using a tag journal:

  1. Create the tag journal lines in advance, with the tag numbers, and flag the tags as “missing.” In this way you can control which tags have not been accounted for when they are returned.
  2. Create journals by either warehouse or zone or rack, depending on your set up and change the description on each so you know which tags and journal are for which areas.
  3. Consider using Microsoft Excel® if you want to scan your information and upload the tags into a tag journal.

Once the lines are transferred to the Counting Journal and posted, the items will be marked in the Cycle Count History as being counted.  The next time it will be eligible for counting will depend on the set up on the counting group.

Method 3: Use the Movement Journal

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If you are using scanners to process your inventory, you may want to consider using the movement journal.  By setting up a journal with a pre-defined offset account, your Finance team can monitor what specifically occurred while processing / posting the inventory.  As well, this journal will generate transactions as lines that are placed into the journal.  Initially, you will need to write down all of your physical inventory, prior to scanning the inventory back in.  A report of the written-off inventory would serve as a check list for what inventory is “missing” once the counting is completed.

What annual inventory counting method do you use? Any tips you’d share?

Written By:  Genie Engles