Quantifying the costs of cycle counting in a two-echelon supply chain with multiple items

Inventory record errors within a supply chain can lead to problems that cause low customer satisfaction and high operational costs. This paper presents a simulation model of a two-echelon inventory system consisting of a retailer, a distribution center, and a supplier that includes multiple item types and the use of cycle counting as the corrective action. An extensive set of cycle-counting configurations were examined while observing the trade-off between fill rates, accuracy, and system costs in order to investigate the best possible configuration of cycle counting for two set of experiments that examine high-demand-low-cost and low-demand-high-cost items. The results indicate that the correct application of cycle counting will increase record accuracy and provide significant amount of savings for the entire supply chain. (C) 2008 Elsevier B.V. All rights reserved.