Inventory Counts: Blind Counts or Show Quantity On Hand?

Above: Inventory counts should always be done with two counters.

During our inventory workshops, which concentrate on physical and cycle-counting, as well as in onsite training sessions, a common question arises when getting ready for inventory counts: "Should the worksheets or mobile devices used for counting display the on-hand inventory quantities?" The response is consistently, "It depends."

There are two distinct perspectives on this issue, each with its supporters and detractors. There's no definitive answer, just personal preferences. Nonetheless, all contemporary Enterprise Resource Planning (ERP) software systems enable users to select this rationale. Inventory counting is an activity that doesn't add value, and its primary purpose is to compare the physical inventory with the records in the computer system. If you use handwritten count tags instead of computer-generated count sheets, there is no alternative. See Count Tags vs. Count Sheets.

This post will discuss the issues related to letting counters be aware of the on-hand inventory balance during physical or cycle counts.

Blind Counts

A blind count involves listing items in your count selection without disclosing the quantity available. It includes the item and location details but does not display the calculated or frozen inventory at the time of counting.

At first glance, this method of verifying computer inventory records by counting the items appears logical. However, the blind count presupposes that the counters might not be entirely reliable and could be tempted to record the visible quantities if accessible. The organizer of the count then matches the reported figures with the system records and examines any differences found.

The counters need to tally the items to confirm the quantity, which is the goal of the count. Without a reference for the expected amount, the only option is to count the inventory.

However, the counters are unaware of the expected inventory quantity, so they have to rely on the current count. Essentially, there is nothing to compare it against. There is no motivation to search for extra materials if the count is low or to conduct an immediate recount if the count is high. As a result, the counters could turn an accurate inventory record into an inaccurate one.

Unit of Measure (UOM) errors are among the biggest causes of counting inaccuracies. When quantities are not included on the count sheets, the likelihood of UOM counting errors rises.

Showing Counters Quantity on Hand

The main goal of inventory counts is not merely counting items but ensuring that the computer records align with the actual physical quantities for both financial and operational reasons. By showing the counters the data from the computer records, their task is to verify these records, after which we make any necessary adjustments.

By displaying the quantity on hand, the counters can grasp what the inventory ought to be. More meticulous counters might remember items stored elsewhere and will persist until all items are found. Furthermore, counters will examine the shipping and receiving departments, as well as the production floor, to locate additional items.

There might be a temptation to perform a quick visual assessment. Consequently, items that are challenging to count, like the low-value barrel of bolts, might not be accurately counted. While miscounted items may not significantly impact inventory value, running out can halt production.

Summary

In our Physical Inventory and Cycle Counting workshops, we instruct our clients to conduct counts using teams of two counters. One individual is responsible for counting, while the other records and verifies the count. The team members frequently switch roles, which also assists with material movement. Utilizing two-person teams reduces the likelihood of colluding to falsify count records. Whether to reveal counts is a matter of preference, and we have seen success with both approaches.

If you need any help with your counting strategy, don't hesitate to contact us.

Roger Pujol is a business improvement consultant and the founder of Champion Business Solutions, LLC. He speaks and writes about encounters helping small to medium-sized businesses (SMBs) improve their business operations.

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