30 September 2021 The lack of intralogistics control can compromise the Purchasing, Sales, Production, and even Marketing sectors. Inventory accuracy issues are among the main challenges for a logistics manager and should be approached with caution because they compromise various processes, causing productivity losses, rework, and the most dangerous of all: financial losses. Inventory is one of the central pillars of a company, and if not well managed, it can cause planning errors, in production, in purchasing, in sales, and even in the company’s marketing actions. How can you sell without knowing how much the company has available? How do you contact suppliers without knowing the ideal quantity to request? How do you fulfill customer orders without the certainty that they will be fulfilled correctly and on time? For these reasons, maintaining inventory accuracy becomes essential for the health of your company. Like financial management, intralogistics management affects various sectors and therefore deserves special attention. In this text, you will learn the main consequences of a lack of inventory accuracy, realizing how important it is to ensure levels close to 100%. Precision = Correct Decisions and Gains The term “accuracy” refers to precision. By applying this concept to the Supply Chain, it is possible to conclude that the more accurate your inventory data is, the more secure your management decisions will be. Fundamentally, the inventory accuracy index measures how much your physical inventory matches your system inventory. Ideally, there should be no discrepancies, as the production, purchasing, and sales teams perform their work based on recorded data. It is also important to emphasize that inventory accuracy is directly related to financial management, after all, inventory is part of a company’s working capital and is one of its most important assets. If accuracy levels are not good, it means there might be excess or missing stock, generating additional costs or causing damage and loss of sales. In both situations, business profitability is compromised, hence the need to take accuracy strategically and seriously. Consequences of Lack of Inventory Accuracy So far, we have noted that a company without good stock management can cause problems in various areas and generate losses. But the damage is not limited to these two points. There are other consequences you need to know in detail to avoid them: 1. Impact on Batch Control If your physical inventory does not match the inventory in the system, it means that your warehouse does not have effective batch traceability, and in this case, discrepancies compromise the monitoring of the conditions of each stored item. Maintaining accuracy ensures, for example, greater control over products stored close to their expiration date, as well as accurate monitoring in case of blocks or recalls. Seeking data equality is thus a way to maintain organization and avoid unnecessary losses. 2. Reduction in Service Level and Subsequent Drop in Sales If a customer requests a product that is in the system inventory, but not present in the physical inventory, it is very likely that their order will not be fulfilled in the expected manner and time. In this case, either the customer will cancel the purchase, or the delivery will suffer significant delays. This type of situation, in addition to reducing the service level, has a direct impact on the sales team because the disruption of orders can mean the loss of a definitive customer, in addition to the loss of the sale. In the case of industry inventory, the lack of accuracy can also affect delivery punctuality due to the lack of raw materials and thus compromise the company’s credibility. 3. Risk of Supply Interruption Due to Stock Depletion If your purchasing team does not have the correct data to request replenishment, a stock depletion may occur. And then the consequence is the risk of supply interruption by your company. 4. Drop in Productivity and Rework It is practically impossible not to associate the lack of inventory accuracy with the drop in warehouse productivity, after all, if the data is not aligned, many employees will waste time making unnecessary replacements or even trying to fulfill orders without the product available. Moreover, after the failure notification, there is rework, as errors must be corrected and orders redone. It is worth adding that discrepancies can even lead to a production halt, with inactive employees during working hours. 5. Frequent Impact on Purchase Negotiations and Emergency Shipments When a stock interruption occurs, all sectors rush to purchase the missing product as soon as possible. As a result, the Purchasing team cannot negotiate better prices with its suppliers. Additionally, emergency shipments occur, which cease to be punctual and become routine. In both situations, there will be unforeseen costs. 6. Difficulty in Return on Investment Due to Excess Stock In a situation opposite to that highlighted in the previous point, when stocks are in excess, the company will take longer to recover the capital invested in acquiring the products and may also have great difficulty in marketing them since its stocks are above the sales margin. In the case of perishable items, the risk of loss is high. 7. Inefficiency in Operations The lack of stock accuracy affects the efficiency of operations as a whole, causing various problems, such as: delays in processes, unnecessary movements, additional transportation expenses, product loss, in addition to additional costs in case of excess stock or the need for rapid replacement. 8. Direct Impacts on Financial Management Finally, the lack of inventory accuracy has a series of impacts on the company’s financial management. In addition to all the additional costs and losses caused by the aforementioned problems, information discrepancies end up compromising the calculation of costs and the company’s profitability. For these and other reasons, the pursuit of inventory accuracy should be one of your management priorities as it is the basis for the proper functioning of all logistical work. Look for ways to improve accuracy levels by relying on technologies that automate and integrate processes. And don’t forget: you need to have real-time information on your warehouse operations so you can identify differences even before they occur. To help you improve your warehouse accuracy levels, we have prepared 10 valuable tips to avoid inventory shortages, read the content now! How does poor inventory accuracy affect your business? Deagor WMS per ecommerce può aiutarti!