TABLE OF CONTENTS It is amazing. Despite the fact that inventory accuracy is so easy to obtain and cost effective, it still eludes many manufacturing and service organizations. Even many of the larger companies still have data integrity issues that create unnecessary variation in their planning and manufacturing processes. The tragedy is the simplicity of the issue. It is really just a matter of management expectation.
Inventory inaccuracy is a curable cancer that plagues more than half of the world s businesses. Inaccuracy, as we will use it, refers to less-than- adequate process control over inventory piece-part location balance records. Accuracy is measured as physical quantity compared to the computer perpetual record where accuracy is only exact matches. The generally accepted minimum threshold of acceptability for inventory record accuracy is 95 percent in high-performance businesses. In other words, for every one hundred inventory balance records, ninety-five must be perfect.
When offsetting variation such as from currency-based metrics is used, accuracy is not posted accurately. The minuses offset the positive variances.
Many organizations do not even track their accuracy on a day-to-day basis. These companies determine accuracy by the costly physical wall-to- wall inventory they take periodically, usually only once a year. When a periodic inventory is used, it is often to validate the company s valuation of inventory on its financial statements. Inventory accuracy must not be determined by currency valuations alone.
The laws of statistics remind us that in any random distribution of data, there will be an equal number of data points...
