Skip to main content

What is difference between Cycle counting and Physical Inventory in Oracle Apps?


Physical Inventory or Cycle counting is used to streamline the inventory of the items within warehouse and the inventory shown in the sytem ( that is to tally the actual inventory and the on hand showing in the system).

A physical inventory is done once a year to check and correct the accuracy of your inventory.  Often used by banks to audit their investment into your company or to simply reset your stock levels so that inventory is correct and customer service is not impacted by wrong information.

A cycle counts purpose is to find systemic problems, it is NOT intended to ensure your inventory accuracy or fix your on hand quantities.  Those are mere bi-products of a cycle
count. 

All inventories will have different classification of products called A,B,C,D classification.  These classes are defined by the importance  and movement of a product where an A item is high dollar / high mover, and a D item is something that is identified by the dust it has on the
shelf. 

A cycle count filters through your inventory over a course of a year. A company may choose to count all their A items 4 times a year, B items 3 times a year, C items twice, and D once. 

The theory behind the Cycle Count is to monitor yours systems (processes and procedures).  Are you pulling parts correctly, are they marked correctly, is paperwork being processed, is the receiving dept. counting items on the inbound, are product bar coded correctly, is a bill of
material correct, theft, and a hundred other things that could possibly cause your inventory to go out of balance. 

A cycle count finds those flaws and offers you a chance to
correct them. 

The reason an A item is counted more often than a D is not
because of Value $$, yet because it is subjected to your
processes a lot more.  Assuming you have a very solid
system/process, you constantly test it (via Cycle Counts),
and you apply that same exact process to an A item as you
do a D, there is a very high probablility that your
inventory accuracy on the D item will be as accurate as
your A, even though you only counted it once in a years
span.

Lastly, a good cycle count has a Hit of Miss criteria. 
There are always going to be acceptable levels of
tolerance.  Simply put, do we really care if we are off by
1 or 2 pcs. of a $0.01 part that we stock THOUSANDS of? 
NO!  So we identify those tolerances.  If your counts fall
with in those tolerances, you have a HIT (good thing).  IF
they fall outside of the tolerance you have a MISS (bad
thing). 

Misses are investigated.  Problems researched and solutions
secured.  THEN as a final measure you would schedule the
MISS for a future cycle count, say in a couple of weeks to
ensure the fix worked, the process is functioning and the
system is good.  

Some differences of the CC and physical inventory is as follows

1)cycle counting can be done  on specific items or selective items 
But in physical inventory we have to count all items.

2)cycle counting can be done multiple time in an year , like monthly or quarterly for high value items but physical count is done once an year or at the most twice for all the items.


3)Cycle Count : We can schedule the count
Physical Inventory : We cannot schedule this.

4)Cycle Count : We cannot have a snap shot
Physical Inventory : We can have a snap shot

5)Cycle Count : We can view the qty in the system
Physical Inventory : We can not view the qty in system

6)Cycle Count : We cane select the items using ABC analysis.
Physical Inventory : It is done for all the items.

7)Cycle Count : We need not to freeze inventory transactions.
Physical Inventory : Need to freeze inventory transactions.

8)Cycle Count : Recount is possible
Physical Inventory : Recount is not possible.

9)Cycle Count : We can maintain recount history.
Physical Inventory : No recount, hence no history.

10)Cycle Count : Adjustments can be procesed on approval.
Physical Inventory : Can be done using adjustment concurrent program

Comments

Post a Comment

Popular posts from this blog

General Ledger FAQ

1.  What responsibility should I use when doing the set up for General Ledger? Use a seeded responsibility like 'Oracle General Ledger Super User'. You may also need to use the System Administrator responsibility. 2.  What are the pre-requisites required to define a new calendar? According to your business needs you need to decide the calendar type required i.e. monthly, weekly or biweekly, the number of periods, adjusting periods and the maximum number of periods within a fiscal year. 3. What are the pre-requisites required to define a new Ledger? Define a Calendar, Chart of Accounts and enable the functional Currency  and convention of subledger accounting method. 4. Why must I check the calendar definition before assigning to a Ledger? The calendar definition cannot be changed once it is assigned to a set of books so it is very important to check that the calendar definition is suitable to the specific business needs, has been d

Difference Between MTS, ATO, MTO ,PTO ,CTO and ETO.

 Make-to-stock (MTS) In MTS environments, products are created before receipt of a customer order. Customer orders are then filled from existing stock, and then those stocks are replenished through production orders. MTS environments have the advantage of decoupling manufacturing processes from customer orders. Theoretically, this enables customer orders to be filled immediately from readily available stock. It also allows the manufacturer to organize production in ways that minimize costly changeovers and other disruptions. However, there are risks associated with placing finished goods into inventory without having a firm customer order or an established need. These risks tend to limit MTS environments to simple, low-variety, or commodity products whose demand can be forecasted readily.  Assemble-to-order (ATO) In ATO environments, products are assembled from components after the receipt of a customer order. The key components in the assembly or finishing process are pla

Accounting entries in Oracle Purchasing and Payables

This document gives in detail different accounts used and the accounting impact of various transactions that take place in Oracle Purchasing and Oracle Payables. Both Standard costing and Average costing methods are considered. The accounts are Oracle Applications specific and might differ from the conventional accounting names. Examples are given wherever required for better understanding of the concept. The sources of these accounts are given. PURCHASING:  Receiving – For Accrual Process for perpetual Accruals Receipts for inventory purchases are always accrued upon receipt. And also use perpetual accruals for expense purchases you want to record uninvoiced purchase liabilities immediately upon the receipt of the expense goods. Receiving Account (Receiving Account) To record the current balance of the material in receiving and inspection. Where to define in Apps: Define Organization                                          Define Receiving Options