Inventory Accuracy

Inventory Accuracy is the relationship of physical inventory compared to stated inventory.  To put in the simplest terms: “Do I actually have what my systems tell me I have?”  Inventory accuracy can be managed using spreadsheets or in any system with a method of tracking and monitoring inventory levels.   

Inventory accuracy is crucial in any industry and affects the day to day operations of the entire business.  Do you have what you need to make your product?  Do you have what you need to suffice your customers’ needs?  Do your suppliers have the materials you need? All aspects of the Supply Chain require inventory accuracy. 

An inaccurate inventory puts manufacturers at risk in a number of ways:  missing shipments, incurring additional labor downtime and costs, incurring expedited freight costs, purchasing more material than what is required, and — the worst scenario — losing customers.

When you strive for inventory accuracy, there are many factors to consider.  

  • How often are you “Cycle Counting” or doing a “Physical”?  This should be daily in some situations.   
  • Do your employees understand the value of an accurate inventory and have they been trained to perform transactions that result in inventory accuracy?  
  • Do you have the correct hardware and software including a Warehouse Management System (WMS) so that your employees can quickly and effectively perform these counts?  The right tools to accurately count and validate the counts are imperative. Make sure you have hardware that is easy and effective for employees to use.   
  • What do you do when inventory is missing or is unaccounted for?  Develop processes to review, track or trace, and react on those discrepancies. 

The keys to inventory accuracy are disciplined employee training, the correct hardware and software for counting and tracking inventory, defined processes to reconcile your inventory numbers, and accurate costing to understand the impact of erroneous inventory numbers. 

Accurate inventory, whether in house or on order, helps with the planning and productivity of your organization.  Knowing what you have or need, weighs heavily on your utilization of resources and ability to produce what you need when you need it.  By having a good “system,” inventory is instantly reconciled and can quickly bring visibility to your MRP or PRP for evaluation.   

When employees trust your inventory numbers, good or bad, they understand the impact on the organization when inventory is not accurate.  They become more diligent about accurately reporting inventory which, in turn, will result in better numbers.  Having the right system increases employee productivity because it changes a mundane task to a quick and efficient use of employees’ time.    

Inventory accuracy gives the organization the ability to handle last minute demands, allows you to keep costs down, and keeps employees working on value added operations.  Once you grasp the idea of Inventory Accuracy, you can focus on what you need, when you need it, and at the cost you expect to pay.  When you implement a successful system, your company gains a distinct competitive advantage.