Changing method: from the full count to a perpetual count

Many warehouses count everything over one weekend every year and find: it can be done, but it costs nerves, overtime and delivery capacity. The perpetual count spreads the counting across the year and therefore sounds tempting. But a change of method is not a switch to flip. It succeeds in stages, with clear prerequisites in the warehouse and with the backing of auditor and head office. This article shows the way.

Prerequisites in the warehouse

Before you decide on the change, check honestly:

• Every bin is clearly designated, and every item lies where the system says it does.
• Receipts and issues are posted promptly, so that the book stock gives a picture of reality at any time.
• The item master is maintained: unique numbers, clear units, no duplicates.
• There is a count team that can count on a rolling basis without disturbing daily operations.
• The zones can be delimited in such a way that one zone can be counted while the rest keeps running.

If one of these is missing, it is the first task, not the new method.

Do not check these points only at the desk. A test run with ten bins chosen at random quickly shows whether the item lies where the system says it does: go to the bins with the system extract and compare. If only six of the ten agree, bin discipline is not yet ready for a rolling count method. The example is illustrative; you set the threshold yourself.

Agreement with auditor and head office

Whether the perpetual count is acceptable for your accounts, and which requirements apply to the count plan, documentation and roll-forward, is decided by your auditor and the rules of head office. The requirements are complex and change; do not rely on general statements, this one included.

Go to the auditor with a concrete draft: zone plan, count rhythm, documentation templates and the treatment of differences. Have approval or requests for changes confirmed in writing before the first quarter begins. Anyone who asks only at year end risks an additional full count.

The change in stages

1. Preparation: put the bin system, master data and posting discipline in order.
2. Pilot zone: count one zone under the future method and test the documentation.
3. Transition year: the count plan runs, and the previous full count remains as a safeguard.
4. Evaluation: the rolling counts are compared with the full count.
5. Switch-over: if results, auditor and head office agree, the full count is dropped.

The transition year with a parallel count (illustrative)

Suppose a warehouse has 30 zones. The count plan provides for three zones a week, so after ten weeks every zone has been counted once. At year end the usual full count follows in addition. The comparison shows: in 27 zones the rolled-forward results of the rolling count agree with the full count within the agreed tolerance, in 3 zones they do not (27 + 3 = 30).

The three zones are investigated. The causes show what still has to be fixed before the switch-over, for example a zone where goods are issued without a document at weekends. The test has then paid off, even though it makes the transition year more laborious. The switch-over counts as passed only when the remaining deviations can be explained.

Typical mistakes

• The change is made only to save effort, without the prerequisites being met.
• The count plan has no owners, and count dates are pushed aside by day-to-day business.
• Valuable items or items prone to shrinkage are not counted more often in the plan than bulk goods.
• The documentation is laid out differently for each count, so the auditor cannot compare them.
• Count results are not posted promptly, so the book stock drifts apart between counts.

In short

The change to a perpetual count pays off if bins, postings and agreement are in order. AuditMaster draws up a count plan that spreads zones and item groups across the year and carries out the counts, on request also alongside the full count during the transition year.