Guide to Inventory Accuracy: How to Calculate and Improve It

Cogsy leverages your inventory data to create a customized purchase order at the click of a button. And this inventory accuracy is the key to making better, more informed purchasing decisions. That’s right — Cogsy is a single source of truth for all your inventory data and makes this information readily available whenever you need https://quickbooks-payroll.org/ it. Sometimes, inventory audits can be performed in-house with a simple count of your existing stock. When you count a smaller percentage of inventory on a more consistent basis, you can quickly catch (and resolve) any inventory issues that come up. Standardized bins and pallets are the backbone of an organized warehouse.

This will allow you to carefully calculate the inventory needed to fulfill future orders, while also zooming in on customer buying behaviors, trends, and https://intuit-payroll.org/ patterns. As we’ve discussed, achieving inventory accuracy is vital for success. Making inventory accuracy a priority will greatly benefit your brand.

Organized inventory storage

Remember that inventory valuation is the monetary value of your unsold stock at the end of a reporting period. Typically, inventory reconciliation is best suited for brands with fewer SKUs — since large volumes of inventory will take considerably longer to tally. With this information, you can maintain a consistent flow of stock from replenishment to fulfillment (and https://personal-accounting.org/ every stage in between). Inventory accuracy gives you a clear picture of where your inventory is, how it’s selling, and how much you need to reorder. Signing up sooner to receive an exclusive and personalized demo site for testing the POS system. Our sales consultants will invest extra effort to tailor the site to your business needs and provide it to you sooner.

This discrepancy amounted to 150 laptops, enabling necessary corrections. For example, an inexperienced forklift driver is more likely to damage products during inventory storage and retrieval. Proper training boosts warehouse efficiency and productivity while reducing inventory management issues. To avoid these problems, your inventory’s digital records must correspond to the actual situation in your warehouses.

• Both under- and overstocking can have disastrous impacts on your business.
• The website would tell customers we had a certain number of bowls in stock, but then someone would come into our physical store and buy us out, with no time to adjust the website.
• Damages, your business is at a loss, and you can even struggle to sell through what you have before it becomes obsolete.
• In supply chain management, inventory accuracy is the cornerstone of efficient operations.

It means your inventory system shows a specific good is available while it’s not. Inventory accuracy can contribute to your customer satisfaction and loyalty. If you can display the correct product availability, customers won’t order out-of-stock items, for example. The order fulfillment process will go smoother as well with faster shipping. This leaves a good impression on customers and increases repeat purchases. On the contrary, inaccurate inventory can lead to unfulfilled orders or missed sale opportunities if the customers don’t know you still have the product they want.

Lackluster inventory management systems

A business relies upon the accuracy of its inventory records in order to maintain its production and customer fulfillment systems. For these records to be truly accurate, they must contain accurate information about quantity on hand, the location of inventory, the unit of measure, and the part number. If any one of these items within an inventory record is wrong, then the entire set of information can be considered sufficiently incorrect to render the entire record useless. For example, the inventory quantity may be completely accurate, but if the location code is wrong, then the materials handling staff cannot find the item. Consequently, the inventory accuracy formula encompasses all four elements.

Percentage of Out of Stock Items

The lower barrier of installation is one, but also Accenture found RFID can increase inventory accuracy from 70% to over 95%. If inventory has been an Achilles heel in your quest to omnichannel success, this is a solution worth implementing. It can also help in other business areas, including preventing theft and tracking how product moves about your store. Standardizing bin and pallet sizes in a warehouse simplifies inventory tracking, reduces human errors, and facilitates accurate recording. Consistent storage configurations enhance the efficiency of picking, packing, and replenishment processes, minimizing the chances of inventory discrepancies. The test score astounds the inventory manager, who has been focusing solely on quantity accuracy.

Utilise Technology for Inventory Management

If your drivers use the app, you can also track their movements and deliveries in real time. Every time they arrive at an address, the app will automatically ask them if they successfully delivered the package. But inventory accuracy doesn’t matter if you drop the ball on last mile delivery. West Coast Distribution struggled to maximize inventory accuracy with its old mishmash of systems. In this article, we’ll explain what inventory accuracy is in-depth, showcase examples of companies improving it, and how you can do it too.

Use more professional storage methods

An omnichannel order management system connects inventory, customer, and order information in a single, unified platform. To calculate inventory accuracy, you need to first get an accurate count of what you have in stock. Next, you can do inventory reconciliation and compare the physical inventory count with the record of inventory on hand. If your retail brand has many SKUs, a high quantity of items, and inventory in many locations, you’ll likely want to use a sample to calculate inventory accuracy.

For instance, if the documented stock count is 1,000 units and the actual count is 950 units, the inventory accuracy percentage is 95%. Bad recordkeeping can lead to unwise judgments, such as purchasing too many inventory goods based on inaccurate consumption data. This will result in excess inventory, higher carrying costs, and unsellable items filling the warehouses. Accurate digital records are required for a successful inventory procedure.

Accurate inventory records empower businesses to make informed decisions about restocking, discounting, and optimizing excess inventory and space. Maintaining a 100% inventory accuracy rate is nearly impossible, but you should always work on  improving inventory accuracy. The average inventory accuracy is 99.6%, with the remaining 0.4% due to unavoidable human error in large corporations. The more transactions you have, the more likely there will be an error in inventory data, and the occasional hiccup isn’t a cause for concern. This method is not as accurate, as you are not comparing each item in your inventory.

However, optimal inventory accuracy is 100%—the closer you can get to that figure, the easier it will be to run your store efficiently. Some of the common inventory accuracy challenges include shrinkage, poor inventory systems, and suboptimal inventory storage. With units in stock, you have products ready to sell and make a profit. Physical inventory counts work best when you complete them regularly.