Inventory Accuracy (Dollars)

Inventory Accuracy (Dollars)

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 absolute difference between reported and physical inventory levels (measured in dollars), as a percentage, subtracted from 100%.

KPI Best Practices

• Perform regular cycle counts to monitor quality of inventory processes
• Set targets for accuracy rates and track progress over time
• Inventory is tagged and scanned as soon as it is received from suppliers

KPI Calculation Instructions Inventory Accuracy (Dollars)?

Two values are used to calculate this KPI: (1) the absolute value of the difference between reported inventory and physical inventory (in total dollars), and (2) the total dollar value of the reported inventory in the inventory management system. Physical inventory (in dollars) should be defined as the total dollar value of inventory that is counted during inventory checks (monthly, quarterly, etc.). Reported inventory should be defined as the total dollar value of inventory that is stated in the inventory management system based on what is tracked electronically during the day-to-day inflow and outflow of goods and materials. The absolute percentage difference between reported inventory and physical inventory should be subtracted from 100% to complete the calculation.

KPI Formula :

1 - ((Absolute Value of Difference Between Reported Inventory and Physical Inventory / Value of Reported Inventory) * 100)