Inventory Accuracy
First of all, what does inventory accuracy have to do with inventory performance? Suppose the inventory accuracy in the warehouse is lousy. What difference would that make? First, inventory inaccuracies can lead to problems with warehouse picking productivity when we send an order picker to a location with the wrong item or insufficient quantity in the location. Second, inventory inaccuracies can lead to fill rate problems, where products are not available to the customer. We may also buy extra product to cover potential errors. If you say, ”Man I’m always off by 20% in the warehouse. Almost always we figure we’re short instead of over. So we may overbuy by 20%.”
Inventory inaccuracies play themselves out in lots of different areas in the organization. So it’s important to try to get this right. So, in some cases, we measure the percent of warehouse locations that don’t have discrepancies. This does not mean if there are 1000 locations in the warehouse, and 500 of them have too much, and 500 of them have too little, and that’s perfect accuracy. That’s not what we’re meaning here. This means if there are 1000 locations in the warehouse, and 100 of them have errors, the accuracy is 90%.
We recommend that the organization maintain metrics for location inventory accuracy (the % of warehouse locations with discrepancies), item inventory accuracy (the % of items with discrepancies), and overall $ value inventory accuracy (the % of dollar value with discrepancies).
Some benchmarks for inventory accuracy from organizations with uniquely stringent requirements for high inventory accuracy follow.
Warehouse Inventory Accuracies for Sample Organizations
Abbott Laboratories, Bacardi, BMW, Carrier, CIBA Vision, C&I, Delta Airlines, Dwyer, Emerson, Kidde, Heidelberg, Jarden, Martek, Mossberg, Navistar, NCR, Nutrisystem, Otis, Pratt & Whitney, Raytheon, REM, Rockwell, Senninger, Swagelok, TNI, Textron, Tiffany, Tyco, and United Technologies.