You can’t manage inventory if you don’t know what you have in stock. When analysts have studied companies that were best in class in demand forecasting, they found that these companies average*: 15% less inventory; 17% higher perfect order fulfillment Then make it ten percent of what it was – a total reduction of 90 percent. Yet, our experience indicates that most retailers suffer from poor inventory accuracy in stores. Calculate the year-end inventory adjustments by … Annual Workforce Turnover 9 25 20 10. These inventory metrics and other key performance indicators (KPIs) can tell you right away how a business defines itself, conveying the trends most important to the company. Unfortunately, asking this question is a fool-proof way to make us squirm. Lean practices are forcing warehouse managers’ hands. Cross Trained Percentage 8 12 49* 9. And that company is still working on that last 10 percent. Here are six tips to follow to ensure your company is operating its warehouse and inventory management processes as accurately and efficiently as possible. Percentage of space occupied by inventory out of the total space available for storage. The cycle count is a statistical sample used to help achieve record integrity and provide a measure of accuracy. This nuts-and-bolts course shows how to implement an inventory accuracy program in 90 days or less. World Class companies measure their inventory accuracy in the number of correct records compared to the total number of records counted through a cycle count. percent. Up-to-date and thorough, Inventory Record Accuracy, Second Edition, describes and discusses the latest tools and techniques in Cycle Counting. Inventory Record Accuracy (IRA) is a measure of how closely official inventory records match the physical inventory. The most effective cycle counting programs reflect the realities of managing inventory in a dynamic environment. Increasing order accuracy by just half a percentage point reduces errors by the thousands each year and the cost of errors by half a million. This helps managers identify monthly increases in inventory against falling sales. Order filling accuracy depends on more than just inventory accuracy. By having optimized and one hundred percent inventory accuracy, scheduling and available to promise processes will work without errors. A World Class manufacturer is someone who has eliminated 90 percent of the waste in the business. The goal, of course, is to keep costs low while getting the right inventory to the right people at the right time to ensure high customer satisfaction. Inventory Accuracy Inventory Accuracy = Regular Stock Takes. Read why. What Type of Industrial Shelving Would Work Best for You? Errors are expensive. Over the past 6 years that I have managed it, our inventory accuracy averages 99.97%, our lowest being 99.301%. You will never achieve world-class customer service levels until your inventory accuracy is close to perfect — or at least in the 95th to 98th percent … We do not cycle count, only a one-time year end invnetory, without shutting down mind you. The requirement to balance keeping the parts in inventory with the need to control spending is the reason it is important to have a clear, rational, and well-understood policy. If you ever wanted an in-depth look at a business, all you’d need to do is take a look at their inventory management metrics. Inventory to Sales Ratio: Measure of stock levels against sales. This does NOT mean that you have 100% accuracy. Inventory management software allows Then, reduce it again by 50 percent. The Cycle Count sum equals 200 also. Many managers equate Inventory Record Accuracy with cycle counting, but there is a lot more to it than just counting. This doesn’t require a huge investment in infrastructure. What is not measured cannot be optimized; and when a measurement is made, it has to be accurate. Figure 3: For this slow-moving product, the day-level forecast accuracy (measured as 100% – MAD/ Mean in percent) is horribly low at 2% and the week-level accuracy rather low at 66%. 15. Maintain absolute bin level inventory accuracy at 97 percent or higher and net inventory accuracy levels at 99.45 percent or higher. Accuracy rate refers to the percentage of items put away correctly the first time; the higher your warehouse’s accuracy rate, the more efficient your put away process, with the ultimate goal of a 100% put away rate. The documents are reviewed to determine the number of items inventoried and the number of location or … 14. Almost half of the businesses surveyed – 42.3 percent – had an inventory shrinkage of 0.99 percent or lower, while 23.1 percent of businesses had an inventory shrinkage of 2 percent or more. Only 9 percent of the businesses surveyed actually had a shrinkage rate close to the overall average (between 1.25 and 1.49 percent), with most businesses significantly higher or lower. So how does this all translate into increased profitability? Within successful frameworks such as these, inventory managers are able to reach their inventory accuracy goals and balance the cost of cycle counting with the cost of analyzing variance causes and maintaining accuracy controls. Good inventory management requires at least 95 per cent accuracy. Inventory Accuracy Standards . Therefore, we’re trying to calculate the amount of profit for that item. Inventory Record Accuracy Course. “What would you consider a good level of forecast accuracy in our business?” is probably the single most frequent question we get from customers, consultants and other business experts alike. inventory optimization alone without better forecasts from demand sensing only lowers safety stock by 13%. The combination of optimization and sensing more than doubles the inventory reduction benefit of optimization on its own. Anyone serious 2) Percent reduction in data transactions. Admittedly, some do try to build a differentiator by focusing exclusively on building and tracking financial key performance indicators (KPIs). These add-on devices cost only a few dollars, and eliminate entry errors and improve accuracy. 5) Inventory accuracy The best way to measure inventory accuracy is to compare how many items are in stock to what’s actually recorded in your database. Upon completion of the physical inventory and reconciliation of the stock records, the count and adjustment documents must be reviewed. Part 1 introduces the concept of ABC classification.. Part 2 provides a step-by-step walk through of how to conduct ABC Analysis.. Part 3 shares a few tips on properly conducting ABC analysis.. For Lean Manufacturing, Start With the ABC’s. They have strong purchasing processes that accurately predict the usage of MRO supplies, which save the facility time, labor, money, and stress in managing and restocking MRO inventory. Maintaining accurate inventory records is a requirement to achieve a satisfying level of inventory optimization. "If you don't maintain physical security in the real world, any and all safeguards you erect in the virtual world may be meaningless." Sales are missed and too much cash is tied up in inventory. The maintenance storeroom manager needs to know the facts regarding costs, the frequency of the need for specific critical expensive parts and the time required for purchasing them in order to keep that balance. Inventory Management Metric #2: Gross Margin Percent. The Inventory Accuracy seminar helps beginning and experienced operations managers more effectively manage and control inventory. So improved forecast accuracy improves fill rates and lowers inventory at the same time. Sell through is the percentage of units sold versus the number of units that were available to be sold. Item ABC: Stated Inventory = 100, Cycle Count = 95 Item BCD: Stated Inventory = 100, Cycle Count =105 In this example, if you add the Stated Inventory it equals 200. Inventory Turnover: The number of times the entire inventory passes through during a period of time. Sell-through rate. However, there are always issues with inventory accuracy and companies have to work with the situation that they have to run their business. World-class facilities keep their MRO inventory low because they can anticipate their needs for materials extremely well. Through a sample scenario, this seminar will provide attendees the opportunity to diagnose inventory problems and discover solutions as a class. Cycle counts are less disruptive to daily operations, provide an ongoing measure of inventory accuracy and procedure execution, and can be tailored to focus on items with higher value, ... is to cycle count inventory by percentage of inventory value (cost multiplied by usage for period). The 3 Pillars of World-Class Maintenance. The two takeaways are that multi-echelon inventory optimization works and that accuracy matters. Companies should not tolerate inaccurate inventory records. The forecast bias is, however, perfect at 100%. This refers to how closely your inventory records match your physical inventory. Cisco-Eagle wins AACE Award for Printed Materials > March(6) 2008 Cisco-Eagle catalogs now available; Study: RFID improves inventory accuracy If only it were that easy! Inventory accuracy is the goal of every company. In other words, an additional half-point of accuracy leads directly increases profit by more than 6%. Inventory accuracy is the foundation of inventory management. A ll operations managers know the great importance of being able to meet their organization’s increasing expectations for reliability, lower costs and higher uptime. (Inventory Put Away Correctly) / (Total Inventory Put Away) = Accuracy … To calculate for this metric, use the formula: Number of Units Sold / Beginning Inventory x 100 Let’s say a bookstore received 500 copies of a thriller novel from the publisher and sold 95 books after a month. 10. Order Picking Accuracy (percent by ... Time Workforce to Total Workforce 7 5 46* 8. 3. Logistics News: Measuring Inventory Accuracy – No Clear Answer, Experts Say (Con’t) 4 www.scdigest.com tion level, you would have an inventory accuracy of 0%.” That may seem like a harsh way to measure it, Mie-semer acknowledges, but he says that too often DC and logistics managers develop accuracy metrics APQCs Open Standards Benchmarking database indicates that an increase in inventory accuracy from 98 percent to 99 percent is associated with an increase in supplier orders delivered on time, faster dock-to-stock cycle time, and an increase in the amount of sales orders delivered on time (Table 1). The gross margin percentage (sometimes referred to as gross profit percent) evaluates how much money you bring in against a certain item. 3) Percent increase in materials shipped to point of use by supplier. Inventory accuracy is one of the major performance factors in any warehouse or distribution center. Percent increase in inventory turnover. This may sound obvious, but I've encountered many companies that use this method. This article is part 1 of a 3 part series on ABC Inventory Analysis. This means you should have regular inventory counts. Warehouse managers constantly are told to do more with less.