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Why 99% Inventory Accuracy Might Not Be Good Enough

99% sounds pretty good, and when we first sit down to talk with companies about inventory accuracy a few think they don’t have problems because they are at 98-99% or better dollar value accuracy. Calculating inventory accuracy this way allows the inventory surpluses to cancel out the shortages, resulting in a lower net discrepancy that doesn’t reflect the ‘true’ level of inventory accuracy.

Our definition of ‘true’ inventory accuracy means the right product, in the right quantity, in the right location.  

Determining  True Inventory Accuracy

To determine your  ‘true’ inventory accuracy, you can either take a look at your latest physical inventory variance reports or randomly sample 50-100 items in your warehouse and compare what your computer system thinks you have in a given location to what is actually there.  What we find when you look at these variance reports are that most companies operating a paper-based warehouse are typically 40-60% accurate.  These variances throughout a warehouse can cost companies serious time and money.

How Inventory Inaccuracies Kill Warehouse Efficiency

Most of the issues that you deal with on a day to day basis are due to inventory discrepancies.  Below is a sampling of some of these issues:

  • Sales rep calls to the warehouse to check stock
  • Mis-shipments due to the wrong product in the wrong location
  • Missed sales because you don't have accurate stock info
  • Customers are promised stock and it turns out you don't have enough
  • Ordering more non-stocks and having it rush shipped only to find out that you did have that product tucked away someplace in the warehouse
  • Countless hours spent trying to find missing or misplaced products
  • All of these disturbances are due to inventory variances.

Inaccuracies won’t burn you every time, but if 40% of your inventory balances are off it is going to cause issues that ricochet throughout your operation.

There is a better way

A company with a well implemented Warehouse Management System will typically achieve ‘true’ inventory accuracy results well above 90-95%, depending on the product mix.  These levels of ‘true’ inventory accuracy are achieved through scanning material into and out of locations, coupled with a real-time cycle inventory program that helps correct inventory errors as well as track down the source of these errors.

Call us today to learn how you too can achieve 90%+ ‘true’ inventory accuracy – getting the right product, in the right quantity, in the right location.

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