Inventory accuracy is the backbone of any robust supply chain. According to Gartner, nearly 38% of supply chain organizations are focusing on technology improvements to enhance inventory processes as they face disruptions like material shortages and inflation. A stark statistic reveals that inventory inaccuracies can cost businesses up to 10% of their annual revenue, a loss that no organization can afford.

As management consultant W. Edwards Deming famously said, “Without data, you’re just another person with an opinion.” Accurate inventory data ensures seamless operations and higher profitability. Let’s dive into understanding and mitigating inventory inaccuracies.

Overview:

What is Inventory Inaccuracy and How Do You Measure It?

Inventory inaccuracy occurs when the recorded inventory does not match the physical stock. This discrepancy can arise from human error, poor processes, or systemic issues.

Key Metrics to Measure Inventory Accuracy

Inventory Accuracy Rate: Compare recorded inventory to physical counts. A 95% or higher rate is ideal.
Cycle Count Accuracy: Measure discrepancies during periodic counts to gauge operational accuracy.
Shrinkage Rate: Tracks lost or stolen items as a percentage of total inventory.

For a comprehensive assessment, integrate real-time tracking with periodic audits.

Top 10 Causes of Inventory Inaccuracies

1. Human Errors

Mistakes such as entering incorrect quantities, mislabeling items, or selecting the wrong products during order picking are among the most common causes. For example, an untrained staff member may record 100 units instead of 10, causing discrepancies that ripple across operations. Implementing barcode scanning can significantly reduce such manual errors.

2. Poor Training

Employees unaware of standard operating procedures (SOPs) or lacking familiarity with inventory systems can inadvertently cause errors. For instance, incorrect usage of software tools during stocktaking can lead to mismatches between physical and digital records. Regular training sessions are essential to prevent this

3. Systemic Errors

Bugs in inventory software or outdated systems may fail to process data correctly. For example, a lag in updating inventory levels after a sale might result in an overstock situation in the records. Modern cloud-based systems reduce the likelihood of such systemic failures.

4. Stock Damage

Items that are damaged during handling, storage, or transportation may go unrecorded, skewing inventory counts. For instance, fragile goods like glassware may break but remain listed as available stock. Routine inspections and damage reporting processes can help address this issue.

5. Supply Chain Disruptions

Delays, partial shipments, or lost goods during transit can create discrepancies. For example, a supplier may ship 95 units of a product instead of the ordered 100, leading to confusion if the shortfall is not documented. Collaborative systems between suppliers and buyers help track such disruptions

6. Inefficient Cycle Counting

Without regular inventory audits, errors can accumulate unnoticed. A lack of periodic cycle counts might lead to unnoticed theft, obsolescence, or misplacement. Businesses should adopt a structured cycle counting strategy, such as counting high-value items more frequently.

Explore: Inventory Cycle Counting: Comprehensive Guide

7. Theft and Fraud

Both internal (employee) and external (shoplifting) theft can contribute to inventory shrinkage. For instance, in retail, theft accounts for nearly 1.5% of total inventory losses annually. Employing surveillance and implementing proper access control can mitigate such issues.

8. Obsolete Inventory

Items that become outdated or unsellable inflate stock levels artificially. For example, technology firms often face this issue with quickly outdated gadgets. Implementing a first-in, first-out (FIFO) policy and regularly reviewing inventory can help.

9. Inadequate Technology

Companies relying on spreadsheets or outdated software are prone to errors. A lack of real-time updates might mean discrepancies between what’s in stock and what’s sold. Upgrading to integrated inventory management systems ensures accurate tracking.

10. Poor Warehouse Layout

Disorganized storage areas lead to misplaced or hard-to-find items, increasing errors during order picking. For example, a cluttered warehouse where similar products are stored close together can result in the wrong product being shipped. Using proper labeling and zoning improves efficiency.

The Role of Mobile Inventory Management Solutions

Modern mobile solutions redefine inventory accuracy. They provide real-time tracking, reduce manual intervention, and integrate with ERP systems to deliver actionable insights.

Propel Apps’ Mobile Inventory Management Solution

Propel Apps offers a cutting-edge mobile inventory management solution designed for seamless inventory operations. Key features include:

Real-Time Updates: Stay informed with live inventory levels.
User-Friendly Interface: Easy-to-use mobile applications tailored for on-the-go tracking.
Advanced Analytics: Predictive insights for inventory optimization.
Scalable Integration: Sync with existing systems for a unified data platform.

With Propel Apps, businesses can achieve near 100% inventory accuracy, cutting losses and enhancing efficiency. Propel’s recent expansion into Australia is testament to its commitment to revolutionizing supply chain management globally.

Final Thoughts

Inventory accuracy isn’t just about avoiding losses; it’s about building trust with stakeholders, improving customer satisfaction, and driving profitability. By addressing root causes, leveraging technology, and adopting best practices, you can turn inventory management into a competitive advantage.

Propel Apps’ mobile inventory management solutions provide a powerful way to transform your operations. Visit Propel Apps to learn more. Together, let’s master inventory management and future-proof your supply chain.