You can set cycle counting tolerance values at three different levels:
Item Attributes window
Item Class Definition
Cycle Count Header
When determining if approvals are required, the system first checks the item attributes. If no tolerances are defined, the system checks the item class definition. If there are no tolerances defined on the item class definition, the system checks the cycle count header for tolerance values.
Oracle Inventory supports two types of cycle count approval tolerances. For each type, you can specify a positive and a negative limit. When a particular cycle count entry results in an adjustment that exceeds any one of these limits, you have a cycle count adjustment that exceeds approval tolerances. Based on the approval option you choose when you define your cycle count, this adjustment is either posted automatically or held for approval.
The quantity variance tolerances a user-defined limit for the difference between the actual cycle count quantity and the system tracked on-hand quantity. You express positive and negative quantity variance tolerances as percentages of the system on-hand quantity.
You enter these percentages when you define your:
cycle count header, see: Defining and Maintaining a Cycle Count
cycle count classes, see: Defining Cycle Count Classes
cycle count items, see: Defining Cycle Count Items
Inventory uses any percentages you define at the cycle count item level first. If you do not have any defined for an item, it uses the tolerances defined for that item's cycle count class. If you do not have any defined for the class, it uses the tolerances at the cycle count header level. If you have no tolerances defined for the header, Inventory assumes that there is no limit to the approval tolerance.
The adjustment value tolerance is a user-defined limit for the total value of a cycle count adjustment. The adjustment value is calculated as:
adj value = (count qty - system on-hand qty) x current item cost
The adjustment value tolerance is expressed as positive and negative amounts in your ledger currency. An adjustment value is out of tolerance if it falls outside of these amounts.
You enter these tolerances when you define your cycle count header and cycle count classes. Inventory uses the values you define at the cycle count class level first. If you do not have any defined for an item's class, it uses the values at the cycle count header level. If you have no tolerances defined for the header, Inventory assumes that there is no limit to the approval tolerance.
The following table shows possible values for quantity variance and adjustment value tolerances for an item in a cycle count:
| Item Attributes | Value |
|---|---|
| Item Standard Cost | $10.00 |
| Positive Quantity Variance Tolerance | 5% |
| Negative Quantity Variance Tolerance | 10% |
| Positive Adjustment Value Tolerance | $200 |
| Negative Adjustment Value Tolerance | $250 |
The following table shows four different count scenarios for the same item and the tolerances that each different scenario violates:
| System on-hand quantity | Count Quantity | Quantity Variance | Adjustment Quantity | Adjustment Value | Tolerance Exceeded |
|---|---|---|---|---|---|
| 100 | 106 | +6% | +6 | +$60 | Positive Quantity Variance |
| 100 | 88 | -12% | -12 | -$120 | Negative Quantity Variance |
| 100 | 122 | +22% | +22 | +$220 | Positive Quantity Variance and Positive Adjustment Value |
| 100 | 73 | -27% | -27 | -$270 | Negative Quantity Variance and Negative Adjustment Value |
The hit/miss tolerance is similar to the quantity variance tolerance in that it is also a user-defined limit for the difference between the system tracked on-hand quantity and the actual cycle count quantity. You express positive and negative hit/miss tolerances as percentages of the system on-hand quantity. A count is considered a "hit" if it is within these tolerances, and a "miss" if it is outside them. The hit/miss tolerance is used to evaluate the accuracy of your cycle counting procedures rather that the actually accuracy of inventory.
You enter hit/miss tolerance percentages when you define your cycle count header and when you define your cycle count classes. Inventory uses the percentages you define at the cycle count class level first. If you do not have any defined for an item's class, it uses the tolerances at the cycle count header level. If you have no tolerances defined for the header, Inventory assumes that there is no limit to the hit/miss tolerance, and all variances are therefore "hits" regardless of the size.
Inventory uses these tolerances to generate the Cycle Count Hit/Miss Analysis report. See: Cycle Count Hit/Miss Analysis.
Negative and positive measurement errors are also user-defined limits for the difference between the cycle count quantity and the system tracked on-hand quantity. Inventory does not make any adjustments to an item whose cycle count quantity differs from the system tracked on-hand quantity by less than the measurement error. Because of this, measurement errors implicitly override any approval tolerances you specify.
You specify measurement errors when you define or update an item. Use measurement errors with extreme caution since they actually prevent cycle count adjustments from taking place. You would typically use this feature on an exception basis for items you cannot accurately count. For example, if you visually check the level of bolts in a bin to estimate the quantity, or you use their weight to approximate the quantity, you might want to allow for measurement errors. Therefore, if your system tracked on-hand quantity for the bolts in that bin is within an acceptable range, you do not perform a cycle count adjustment. See: Inventory Attribute Group.