21 November 2021 Taking care of a company’s logistics has become an increasingly demanding task, as it is necessary to constantly seek improvements in customer service while simultaneously reducing costs. Combining these two objectives can be simpler when the manager monitors important logistics indicators for your business, managing not only to monitor how the processes are but also to identify faults that can be corrected over time to avoid significant losses. In our Blog, we have already covered important KPIs, such as OTIF (On Time In Full), OCT (Order Cycle Time), OFR (Order Fill Rate), and OTD (On Time Delivery), many of which are related to the quality of customer care. Regarding inventory management, there is an extremely relevant indicator, Inventory Accuracy. This is the KPI we will address in this text. What is Inventory Accuracy? The term “accuracy” derives from the English word “accuracy” and carries the idea of precision in its meaning. In Logistics, it means having exact information about stored products, that is, having an equivalence between what is recorded in the system and what is actually present in the physical warehouse. In practice, this precision means that when an employee goes to the registration site, the part will be there, in the exact position, in the quantity registered by batch or serial number, and correctly labeled. In this sense, Inventory Accuracy indicates the level of quality and reliability of the information contained in the control systems, in relation to the physical existence of the items. In cases where this information does not match the actual balance, we say that the inventory is unreliable or inaccurate. Why is Inventory Accuracy important? Maintaining high accuracy means ensuring a reliable and up-to-date view of your inventory, whether it is a warehouse, a production site, or a retail store. But it is not enough to make this information available to office staff and selected individuals. To ensure efficient operation, every worker interacting with your inventory must have real-time visibility of it. The impact of this can reach other areas, such as: Faster order fulfillment: From the moment a new order is received, the team needs reliable data to pick, pack, and ship accurately. Your level of accuracy will determine how quickly these activities can be performed and how prone they are to errors. It is worth adding that accuracy will be a significant factor in ensuring agility in delivery, which is now a crucial factor for any competitive business and has a tangible effect on customer satisfaction and retention. Efficient warehouse: At the operational level, obtaining accurate inventory data means that staff can perform daily activities more productively and efficiently. A common pain point in an intralogistics operation is that workers must spend time navigating the DC searching for items that have been misplaced, out of stock, or expired and unfit for sale. With accurate inventory, these challenges can be mitigated. Reliable inventory counting: This is a two-way advantage: by counting inventory correctly, we achieve accuracy, and with greater accuracy, we can count more efficiently. The trick to achieving this is to have the right technologies and processes in place. If your current counting method involves pausing the operation, opening loopholes for backorders, you are losing efficiency. Solutions like the WMS system and the RF collector can give you the ability to periodically count designated zones and products, keeping your operations running smoothly. And, by counting more regularly, closing the warehouse for a single annual count becomes a thing of the past. Cost savings: Cost savings are inevitable when you have a more productive workforce capable of fulfilling orders more efficiently and accurately. Your team is doing more with fewer errors, saving time and money. Loss reduction: When you aim for high inventory accuracy, you are automatically working to reduce losses in the warehouse, which are responsible for significant financial loss. Fundamentally, if an operation prioritizes high inventory accuracy, by conducting frequent counts, the manager can identify losses and discrepancies and make the necessary changes to prevent them from recurring. Otherwise, these losses can accumulate, and the damage can be significant. To get an idea of how accuracy is directly linked to a company’s financial health, a survey conducted by the Brazilian Association for Loss Prevention (Abrappe) highlights that Brazilian retail losses in 2018 were 1.38% of net sales, representing a value of about 21.46 billion reais. Among the main causes are: operational failure (36%), external theft (20%), inventory errors (13%), internal theft (11%), and administrative errors (9%). Such losses could be avoided if companies sought to achieve maximum inventory accuracy. Make more assertive decisions – In general, if stock information is unreliable, the manager will not be able to make assertive decisions, and this will also affect the Production, Purchasing, and Sales sectors, as they need to know the real situation of the warehouse to develop their work. How to measure? The calculation of inventory accuracy can be done by evaluating each item separately or the total stored. In both cases, simply divide the number recorded in the physical inventory by what is in the system and multiply by 100. Inventory Accuracy = Number of items recorded in the inventory / Number of items in the system x 100 For example, if the inventory count found that there are 120 units of a certain item and the system shows 135, the calculation would be 120Ă·135 = 0.88 which, multiplied by 100, gives an accuracy index of 88%. The ideal value can depend on both the type of merchandise and the nature of the activity, however, the most suitable percentage would be closer to 100%. Market best practices recommend a value above 95%. How to achieve a high stock accuracy index? Inventory control Are you tired of losing sales and customers because you realize too late that you are out of stock for certain products? Or are you tired of discarding expired items in your warehouse or having to justify to your manager that there has been a loss of stored goods? In that case, it’s time to improve inventory accuracy. As we highlighted earlier, by accurately monitoring your products, you can improve your performance as a company and execute more efficient operations. Therefore, it is necessary to act now. To help you, we have set aside some tips to increase inventory accuracy: Understand the processes: The first step to increasing inventory accuracy is to understand the existing processes. By identifying where inefficiencies already exist in your operation, you can create a strategy to address and optimize the relevant factors. Reduce product handling: Determine the number of touchpoints each product has during its journey through the warehouse and try to minimize them. The more often employees interact with a product, the more likely it is to be misplaced or incorrectly recorded. If you are using manual processes to track your inventory, working to reduce the number of touchpoints is a good way to temporarily reduce the risk of human error. Correctly identify products: Another important step is to ensure that item names, numbers, and descriptions are consistent wherever they appear. A more advanced way to uniquely identify items is through barcodes. By applying barcodes to your products (and their respective storage locations), storage and picking become faster and more assertive. With this option, there is no room for ambiguity. Implement cycle counts: It is very important to perform periodic stock counts to identify small deviations and make corrections before they become large losses. Many companies choose to do only one count per year (general inventory), having to stop the operation to perform it. And, in many cases, when losses are identified, it is too late to make adjustments and avoid losses. That’s why the most recommended is to use cycle counting, which is embedded in the warehouse routine, without having to stop work. In this case, items can be checked in groups (by batch, storage area, type, etc.), with the counting frequency defined based on criteria such as their turnover, value, historical loss/divergence index, among other parameters. To perform cycle inventories, relying on the WMS system helps greatly, as the software automatically generates counting orders and records everything that has already been verified, avoiding confusion and errors by employees. The WMS has a series of inventory models ideal for both routine quality controls and monitoring warehouse movements. In this way, it is possible to control everything that enters and exits the DC, ensuring greater security and recording correct, detailed, and updated data. Discipline and motivate your employees – All employees handling the products must keep in mind the maintenance of high stock accuracy. For this, it is important to provide training that shows how they must comply with control and security procedures. Additionally, as a form of incentive, they can be subsidized upon reaching the goal. Prioritize good processes and rely on technology Achieving a high inventory accuracy index is one of the pillars of your business’s success. Therefore, prioritize this indicator, measure it periodically, and seek good control and security of stored products. When necessary, reevaluate your operational and administrative processes. And don’t forget that technology is a great ally, helping to avoid errors and identify discrepancies in time to be corrected. Inventory Accuracy: What It Is, How to Measure It, and How to Achieve a Desirable Rate Deagor WMS per ecommerce può aiutarti!