{"id":8756,"date":"2021-10-26T07:35:29","date_gmt":"2021-10-26T07:35:29","guid":{"rendered":"https:\/\/www.mrpeasy.com\/blog\/?p=8756"},"modified":"2024-06-03T13:40:15","modified_gmt":"2024-06-03T13:40:15","slug":"cycle-inventory","status":"publish","type":"post","link":"https:\/\/www.mrpeasy.com\/blog\/cycle-inventory\/","title":{"rendered":"What Is Cycle Inventory and How to Manage It?"},"content":{"rendered":"\n<p>Cycle inventory is the stock that is used to respond to\nregular sales and demand forecasts, as opposed to the safety stock used when\nthere are fluctuations in demand or supply. Properly managing cycle stock is\ntherefore a crucial part of any well-functioning business.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"1000\" height=\"563\" src=\"https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2021\/10\/cycle-inventory.jpg\" alt=\"cycle-inventory\" class=\"wp-image-8754\" srcset=\"https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2021\/10\/cycle-inventory.jpg 1000w, https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2021\/10\/cycle-inventory-300x169.jpg 300w, https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2021\/10\/cycle-inventory-768x432.jpg 768w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\" \/><\/figure>\n\n\n\n<!--more-->\n\n\n\n<p><em>You can also listen to this article:<\/em><\/p>\n\n\n\n<figure><iframe loading=\"lazy\" height=\"150\" width=\"100%\" src=\"https:\/\/www.podbean.com\/player-v2\/?i=4ehy4-114598e-pb&amp;from=pb6admin&amp;share=1&amp;download=1&amp;rtl=0&amp;fonts=Arial&amp;skin=1&amp;font-color=&amp;btn-skin=3\"><\/iframe><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #343333;color:#343333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #343333;color:#343333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.mrpeasy.com\/blog\/cycle-inventory\/#What_Is_Cycle_Inventory\" >What Is Cycle Inventory?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.mrpeasy.com\/blog\/cycle-inventory\/#Why_is_Cycle_Inventory_important\" >Why is Cycle Inventory important?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.mrpeasy.com\/blog\/cycle-inventory\/#Using_software_to_manage_Cycle_Inventory\" >Using software to manage Cycle Inventory<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.mrpeasy.com\/blog\/cycle-inventory\/#Terms_related_to_Cycle_Inventory\" >Terms related to Cycle Inventory<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.mrpeasy.com\/blog\/cycle-inventory\/#Safety_stock\" >Safety stock<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.mrpeasy.com\/blog\/cycle-inventory\/#Inventory_turnover_and_inventory_turnover_ratio\" >Inventory turnover and inventory turnover ratio<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.mrpeasy.com\/blog\/cycle-inventory\/#Cycle_inventory_vs_cycle_count\" >Cycle inventory vs. cycle count<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.mrpeasy.com\/blog\/cycle-inventory\/#Key_takeaways\" >Key takeaways<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_Cycle_Inventory\"><\/span>What Is Cycle Inventory?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Cycle inventory, also known as cycle stock or working inventory, is the part of total inventory that is available to meet the usual demand. It is comprised of the products that will be used first to fulfill customer orders in the standard business cycle of a company. These items are constantly sold and replenished in a continuous loop, giving them the name of cycle inventory.<\/p>\n\n\n\n<p>Cycle inventory is contextually related to safety stock, as they both are part of a company\u2019s on-hand inventory, and the two concepts are often used together. Cycle stock is also tightly connected to a company\u2019s inventory turnover rate.<\/p>\n\n\n<div class=\"banner-v2\">\n    <p class=\"banner-v2__desc\">Avoid stockouts and overstocking with MRPeasy<\/p>\n    <a class=\"banner-v2__link\" href=\"https:\/\/www.mrpeasy.com\/sign-up\/\" target=\"_blank\" data-ga-event=\"blog_signup_banner_blue\">Try for free<\/a>\n<\/div>\t\t<style>.banner-v2 {\n    float: right;\n    display: flex;\n    flex-direction: column;\n    justify-content: center;\n    align-items: center;\n    padding: 40px 32px;\n    gap: 16px;\n    width: 356px;\n    height: 205px;\n    background: linear-gradient(199.68deg, #6084E5 13.17%, #5FA7DD 82.1%);\n    border-radius: 4px;\n    margin-left: 12px;\n    margin-bottom: 12px;\n    margin-top: 15px;\n}\n\n@media (max-width: 767.98px) {\n    .banner-v2 {\n         width: 100%;\n         height: 173px;\n         margin-bottom: 0;\n         margin-left: 0;\n    }\n}\n\n.single__content p.banner-v2__desc {\n    margin: 0 !important;\n}\n\np.banner-v2__desc {\n    width: 292px;\n    font-style: normal;\n    font-weight: 700;\n    font-size: 22px;\n    line-height: 29px !important;\n    text-align: center;\n    color: #FFFFFF;\n    margin: 0 !important;\n    order: 0 !important;\n}\n\n.single__content a.banner-v2__link {\n    color: #FFFFFF !important;\n}\n\n.single__content a.banner-v2__link:hover {\n    color: #003557 !important;\n}\n\na.banner-v2__link {\n    display: flex;\n    justify-content: center;\n    align-items: center;\n    width: 181px;\n    height: 51px;\n    padding: 18px 0;\n    border-radius: 4px;\n    background: #003557;\n    font-weight: 700;\n    font-size: 16px;\n    color: #FFFFFF !important;\n    text-decoration: none !important;\n    order: 1 !important;\n}\n\n.banner-v2__link:hover {\n    background: white;\n    color: #003557 !important;\n}<\/style>\n\t\t\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_is_Cycle_Inventory_important\"><\/span>Why is Cycle Inventory important?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Cycle inventory can be considered the most important part of a company\u2019s stock as these are the goods that are used to respond to regular sales and <a aria-label=\"demand forecasts (opens in a new tab)\" href=\"https:\/\/www.mrpeasy.com\/blog\/demand-forecasting\/\" target=\"_blank\" rel=\"noreferrer noopener\">demand forecasts<\/a>. Forecasting cycle stock requirements is therefore necessary to ensure the optimum performance of the business.<\/p>\n\n\n\n<p>Cycle stock management helps companies in quite a few different ways: <\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Avoiding overstocking<\/strong>, i.e. ordering and holding on to excessive amounts of inventory<\/li>\n\n\n\n<li><strong>Avoiding <a href=\"https:\/\/www.mrpeasy.com\/blog\/stockout\/\" target=\"_blank\" rel=\"noreferrer noopener\">stockouts<\/a><\/strong>, i.e. running out of merchandise and becoming unable to fulfill customer orders<\/li>\n\n\n\n<li><strong>Reducing costs<\/strong> related to storing and handling inventory by only keeping optimal quantities of stock<\/li>\n\n\n\n<li><strong>Increasing customer satisfaction<\/strong> by improving the <a href=\"https:\/\/en.wikipedia.org\/wiki\/Service_level\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"service level (opens in a new tab)\">service level<\/a> of the company, i.e. keeping lead times short and making sure lost sales are kept at a minimum<\/li>\n\n\n\n<li><strong>Retaining the necessary amount of safety stock<\/strong> by not having to dip into the inventory buffer due to an unseen cycle stock depletion<\/li>\n\n\n\n<li><strong>Improving cash flow<\/strong> by ensuring that customer orders can be fulfilled and inventory is replenished at a reasonable rate.<\/li>\n<\/ul>\n\n\n\n<p>Properly managing it is, therefore, a crucial part of any business operation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Using_software_to_manage_Cycle_Inventory\"><\/span>Using software to manage Cycle Inventory<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Implementing an <a rel=\"noreferrer noopener\" aria-label=\"inventory management software (opens in a new tab)\" href=\"https:\/\/www.mrpeasy.com\/inventory-management-software\/\" target=\"_blank\">inventory management software<\/a> gives companies the capability to collect huge amounts of inventory-related data and to quickly and efficiently process and analyze this information. Keeping historical data about stock movements and demand for specific SKUs provides you with the possibility to create accurate demand forecasts, foresee fluctuations, and thereby optimize your cycle inventory.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.mrpeasy.com\/inventory-management\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"Inventory management (opens in a new tab)\">Inventory management<\/a> or ERP systems also give their users a real-time overview of their inventory levels and the performance of their SKUs. Setting reorder points for the SKUs helps ensure that the replenishment of inventory is done systematically when stock levels drop to a certain point.<\/p>\n\n\n\n<p>This kind of software is also a tremendous help when it comes to inventory costing and accounting. By using methods such as First In, First Out (FIFO) or Last In, First Out (LIFO), companies can make sure that inventory is properly valued and that the expiry of goods is kept at a minimum.<\/p>\n\n\n\n<p>The best such software systems also automatically calculate the <a href=\"https:\/\/www.mrpeasy.com\/blog\/cost-of-goods-manufactured-cogm\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"Cost of Goods Manufactured (COGM) (opens in a new tab)\">Cost of Goods Manufactured (COGM)<\/a>, the Cost of Goods Sold (COGS), and gross profit, providing invaluable real-time insight into the financial health of the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Terms_related_to_Cycle_Inventory\"><\/span>Terms related to Cycle Inventory<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are some other inventory management terms that are related to cycle inventory, or often confused with it.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Safety_stock\"><\/span>Safety stock<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>While cycle stock consists of the goods that are used or sold in a standard business cycle, safety stock signifies the goods that are kept just in case. This part of inventory acts as a buffer that is only used when there are unforeseen spikes in demand or problems with supply. Using safety stock, companies can retain their service levels and sell to customers when sales are greater than expected, when production is down, or when suppliers are unable to deliver goods within the expected timeframe.<\/p>\n\n\n\n<p>Safety stock is best used along with a <a href=\"https:\/\/www.mrpeasy.com\/blog\/what-is-reorder-point-and-reorder-point-formula\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"reorder point (opens in a new tab)\">reorder point<\/a>, but both of these have to be mathematically defined in order to ensure minimized costs and optimum service levels.<\/p>\n\n\n\n<p>There are many formulas for calculating safety stock, some\nof which are used in very specific situations (e.g. when demand is constant but\nsupplier lead times are inconsistent, or vice-versa). The standard formula used\nin many companies, however, is the average-maximum formula:<\/p>\n\n\n\n<p><strong>Safety Stock = (Max.\nLead Time x Max Demand) \u2013 (Avg. Lead Time x Avg. Demand)<\/strong><\/p>\n\n\n\n<p><em>Read more about <a href=\"https:\/\/www.mrpeasy.com\/blog\/safety-stock\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">Safety Stock<\/a>.<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Inventory_turnover_and_inventory_turnover_ratio\"><\/span>Inventory turnover and inventory turnover ratio<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Cycle stock is also related to inventory turnover or the\ntime with which the inventory of an SKU is sold and replaced. This gives an\nindication of how efficiently inventory is managed and how well sales and\nmarketing work.<\/p>\n\n\n\n<p>The inventory turnover ratio represents the number of times\ninventory is sold and replaced during a set period. The efficient management of\ncycle stock is, therefore, a prerogative for a healthy inventory turnover\nratio.<\/p>\n\n\n\n<p><em>Read more about the <a href=\"https:\/\/www.mrpeasy.com\/blog\/inventory-turnover-ratio\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">Inventory Turnover Ratio<\/a>.<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cycle_inventory_vs_cycle_count\"><\/span>Cycle inventory vs. cycle count<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Cycle inventory is sometimes confused with cycle count,\nanother inventory management term that is used to describe the stocktaking\npractice where only a part of the total inventory is counted at once.<\/p>\n\n\n\n<p>Cycle count contrasts with traditional physical inventory\ncounting. During the latter, operations are put on hold in the facility to go\nthrough the whole inventory and count it. A cycle count is much less disruptive\n\u2013 certain parts of inventory are counted at a time, with operations continuing\nwithout stoppage.<\/p>\n\n\n\n<p>Cycle count is often used together with <a aria-label=\"ABC analysis (opens in a new tab)\" href=\"https:\/\/www.mrpeasy.com\/blog\/abc-analysis\/\" target=\"_blank\" rel=\"noreferrer noopener\">ABC analysis<\/a> which helps prioritize items by their value, thereby giving an indication of which items should be counted more frequently and which items should get less attention.<\/p>\n\n\n<div class=\"banner-v1\">\n    <div class=\"banner__text\">\n        <div class=\"banner-v1__title\">Always know what you have in stock and what you&#8217;ll need<\/div>\n        <div class=\"banner-v1__desc\">Have a complete overview of your inventory and calculate material requirements in just a few clicks with MRPeasy.<\/div>\n        <div><a class=\"banner-v1__link\" href=\"https:\/\/www.mrpeasy.com\/sign-up\/\" target=\"_blank\" data-ga-event=\"blog_signup_banner_white\">Try for free<\/a><\/div>\n    <\/div>\n    <div class=\"banner__img\">\n        <img decoding=\"async\" src=\"https:\/\/www.mrpeasy.com\/blog\/wp-content\/themes\/mrpeasy\/assets\/images\/banner.svg\" alt=\"banner\">\n    <\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_takeaways\"><\/span>Key takeaways<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cycle inventory, also known as cycle stock or working inventory, is the part of total inventory that is available to meet the usual demand.<\/li>\n\n\n\n<li>Forecasting cycle stock requirements is necessary to ensure the optimum performance of the business.<\/li>\n\n\n\n<li>Properly managing cycle stock also helps in avoiding overstocking and stock-outs, reducing holding costs, increasing customer satisfaction, retaining the necessary amount of safety stock, and improving cash flow.<\/li>\n\n\n\n<li>Cycle stock is best managed with a dedicated inventory management or ERP\/MRP software that provides businesses with data collection and analysis capabilities that help create more accurate forecasts and make better business decisions.<\/li>\n\n\n\n<li>Another part of a company\u2019s on-hand inventory is safety stock \u2013 the buffer that is used to respond to abnormalities in supply or demand.<\/li>\n\n\n\n<li>Cycle inventory is often confused with cycle counting \u2013 a stocktaking method wherein only a part of the inventory is counted at a time.<\/li>\n<\/ul>\n\n\n\n<p><em>You may also like: <a href=\"https:\/\/www.mrpeasy.com\/blog\/inventory-tracking\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"Inventory Tracking - An Essential Guide for SMEs (opens in a new tab)\">Inventory Tracking &#8211; An Essential Guide for SMEs<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Cycle inventory is the stock that is used to respond to regular sales and demand forecasts, as opposed to the safety stock used when there are fluctuations in demand or supply. Properly managing cycle stock is therefore a crucial part of any well-functioning business.<\/p>\n","protected":false},"author":7,"featured_media":8754,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[96,94],"tags":[829,827,828,387,50,804,454,455,66,373],"class_list":["post-8756","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-inventory","category-tips","tag-cycle-count","tag-cycle-inventory","tag-cycle-stock","tag-demand-forecasting","tag-inventory-management","tag-inventory-management-software","tag-inventory-turnover","tag-inventory-turnover-ratio","tag-mrpeasy","tag-safety-stock"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Is Cycle Inventory and How to Manage It? - MRPeasy<\/title>\n<meta name=\"description\" content=\"Cycle inventory is the stock that is used to respond to regular sales and demand forecasts, making it a crucial part of business to manage. 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