Inventory Accuracy (Location)

Inventory Accuracy (Location)

KPI Details

Inventory Accuracy measures the precision of the controls set in place to maintain correct inventory counts. Low values for this KPI may suggest that the company has issues with theft, poor inventory tracking, insufficient training for warehouse employees, supplier documentation errors, too many people responsible for inventory control or inadequate systems in place for defining units of inventory (units vs. cases vs. pallets, etc.). Low performers in Inventory Accuracy will not only have to spend time and money resolving inventory accuracy issues, but they also risk not knowing the true amount of inventory on hand, which increases the risk of stock-outs and backorders for customers.

KPI Definition

The number of physical inventory locations/spaces that match up with the quantity and location in the reported inventory system divided by the total number of inventory locations/spaces counted, as a percentage.

KPI Best Practices

• Create names/codes for inventory locations and label locations clearly
• Enforce the use of purchase orders to plan for incoming shipments in advance
• Document inaccurate inventory locations to identify patterns in product, quantity, location, etc.

KPI Calculation Instructions Inventory Accuracy (Location)?

Two values are used to calculate this KPI: (1) the number of physical inventory locations that match the product and quantity that is stated in the reported inventory, and (2) the total number of physical inventory locations counted during the same measurement period. Physical inventory locations should be defined as any storage space that is used to hold inventory such as cubicles, bins, slots, etc. Reported inventory should be defined as the inventory management system that contains information on what product type and quantity should be held in each inventory location (cubicles, bins, slots, etc.) based on what is tracked electronically during the day-to-day inflow and outflow of goods and materials.

KPI Formula :

(Number of Accurate Inventory Locations / Total Number of Inventory Locations Counted) * 100