A metric that measures the difference between your warehouse records and your actual stock is known as inventory accuracy. Real inventory refers to the actual quantity of merchandise you have counted. At the same time, electronic records describe what your business uses for marketing and selling its products across online and offline channels. You mainly store inventory data for electronic records in an inventory management system or ERP solution. Furthermore, electronic inventory data is also automatically updated with e-commerce solutions and integrations.
If you have a damaged product that you can’t sell, exclude it from your physical count. Examining your inventory records sheds light on discrepancies in accounting and highlights where stock is missing (so you can address any potential fraud head-on). Inventory shrinkage will likely throw off your inventory valuation (the monetary value of your unsold stock) when using the retail inventory method. So, it’s important to correct your electronic records as soon as possible. Inventory accuracy is a percentage calculated by taking physically counted stock numbers and comparing them to digitally captured stock numbers. This percentage is a crucial metric to track as it reflects the accuracy of your inventory management.
Lowers Operating Costs
According to Auburn University’s RFID Lab, average inventory accuracy for companies ranges from 65% to 75%. That includes companies that use SKUs and barcode scanning to manage inventory. Your records may show enough stock available when you’re down to a single unit. It is not possible to manage your stock levels efficiently without maintaining accurate digital records.
- Accurate inventory tracking data allows businesses to make informed decisions regarding procurement, production, and distribution.
- Effective inventory management, encompassing precise counting and tracking, is paramount for business success.
- Companies with a relatively small inventory will likely not have to count as often as companies with huge numbers.
- For example, if you have manually counted 950 inventory units and your records show you were supposed to have 1000 units.
Excess inventory, on the other hand, leaves you with too much money tied up in unsold goods. The order fulfillment platform by Flowspace effortlessly integrates with e-commerce platforms and various sales channels. This allows brands to easily monitor inventory, manage products, and generate sales order summaries in mere moments.
Pick and Pack Warehousing for eCommerce Fulfillment
This, in turn, will help your business grow and improve consumer loyalty. Moreover, Flowspace offers an in-depth product inventory management system, granting brands a full view of their stock. This enables brands to monitor their inventory in real-time, receive notifications when stock is running low, and derive insights to predict future product needs. As a result, brands can maintain the ideal stock quantity, sidestep low inventory scenarios, and cut down on surplus inventory expenses. Leveraging technology can significantly enhance a brand’s inventory accuracy efforts and streamline warehouse operation. Brands can implement a warehouse management system, real-time tracking, and automation.
Inventory Financing in E-commerce
It is almost impossible to retain a 100% inventory accuracy rate, no matter what calculation method and technology you employ but it shouldn’t be too far from it. Typically, the average inventory accuracy is 99.6%, where the 0.4% is mostly due to human error that is inevitable for large companies. The more transactions you have, the higher the probability of a discrepancy in inventory data, and the occasional mishap isn’t something to worry much about. These automations led to fewer human errors and an astounding 99.99% inventory accuracy even without a manual cycle counting program.
Data monitoring features
The closer you get to 100%, the easier it will be to run a profitable retail store. Similarly, employee theft can be the cause of low inventory accuracy. Make sure that retail staff who have access to the stockroom can be trusted, and kit the area out with CCTV to protect your merchandise from thieves. Some of the common inventory accuracy challenges include shrinkage, poor inventory systems, and suboptimal inventory storage. This guide discusses why it’s important to monitor inventory accuracy, with bonus tips on how to calculate and improve your own.
Regular inventory audits involve physically counting and verifying stock to identify discrepancies between recorded and actual quantities. These audits provide opportunities to correct any inventory inaccuracy quickly, uncover process inefficiencies, and ensure ongoing accuracy maintenance. the elderly or disabled irs tax credit for 2020 details. On the other hand, high inventory accuracy ensures timely order processing, accurate shipment, and improved customer experience. By meeting customer expectations consistently, a brand can enhance loyalty, increase customer retention rates, and foster a positive brand reputation.
Here are some of the reasons why maintaining inventory accuracy is so important. When your forecasts are automated, it dramatically reduces the number of errors you’ll encounter. And fewer errors translate to greater accuracy — not just for your inventory levels but your operations as a whole. Then, divide it by the inventory value you’re supposed to have on hand. The merchandise you’re supposed to have at your warehouse can be found in whatever system you use to track inventory data.
Someone with previous experience managing inventory can advise on the best way to count your stock, assist with a cycle counting program, and run regular audits to maintain accuracy. That frees up extra time for you to work on the things you’re best at. Modern smart inventory management systems often utilize AI-informed data analytics tools to help teams better understand collected data. Inventory asset management refers to the combined monitoring of a business’ raw materials, saleable inventory and key resources such as equipment and machinery.
You can consider investing in a more viable inventory management system or ERP solution with advanced features suited to your business requirements. We hope that you now have a better understanding of what the inventory accuracy formula is and how to calculate it. However, if an employee discovers where part of the inventory went missing, they might assume that also accounts for the rest of the discrepancies. If 20 units of an item went missing because someone forgot to scan them out of the system, the employee might assume that forgotten scans also accounted for the rest of the lost inventory.