Inventory Accuracy
Also known as: Stock Accuracy, Inventory Record Accuracy, IRA
Definition
Inventory accuracy is the percentage match between inventory quantities recorded in your system and actual physical counts. High accuracy is essential for fulfilling orders, making purchasing decisions, and maintaining reliable financial records.
Calculating Inventory Accuracy
Inventory Accuracy = (Accurate SKUs ÷ Total SKUs Counted) × 100
Or by quantity: Accuracy = 1 - (|System Qty - Physical Qty| ÷ System Qty) × 100
Example:
- System shows 100 units
- Physical count: 97 units
- Accuracy = 1 - (3 ÷ 100) = 97%
Accuracy Benchmarks
| Performance Level | Accuracy Rate |
|---|---|
| Poor | <95% |
| Average | 95-97% |
| Good | 97-99% |
| Excellent | 99%+ |
| World-class | 99.5%+ |
Causes of Inventory Inaccuracy
Process Issues
- Receiving errors
- Pick errors
- Shipping mistakes
- Returns not processed
- Damage not recorded
System Issues
- Data entry errors
- System integration gaps
- Timing of updates
- Incorrect units of measure
Other Factors
- Theft/shrinkage
- Vendor quantity errors
- Mislabeled products
- Misplaced inventory
Improving Inventory Accuracy
Technology
- Barcode scanning at all touchpoints
- WMS implementation
- Real-time updates
- System integrations
Processes
- Regular cycle counting
- Quality checkpoints
- Clear procedures
- Root cause analysis
People
- Training programs
- Accountability measures
- Accuracy incentives
- Error feedback
Measuring Accuracy
By SKU Count
- What % of SKUs are accurate?
- Good for breadth assessment
By Unit Count
- What % of total units are accurate?
- Better for financial accuracy
By Dollar Value
- What % of inventory value is accurate?
- Most important for financials
Impact of Poor Accuracy
- Stockouts (system shows available, but not there)
- Overstocking (system shows less than reality)
- Customer service failures
- Financial reporting errors
- Poor purchasing decisions
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