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Inventory Record Accuracy
A common calculation is:

Stratify SKU's: (annual usage X standard cost)
A items= items representing the top 80% of total dollars
B items= items representing the next 15% of dollars
C items= items representing the bottom 5% of dollars

Cycle count items (usually daily) using a random sample, within the following groupings:
A items = 4 times per year
B items = 2 times per year
C items = 1 time per year

Items considered accurate if the actual on-hand quantity matches the perpetual inventory quantity, within the following tolerances:
A items = plus or minus 1% quantity variance from perpetual balance
B items = plus or minus 3% quantity variance from perpetual balance
C items = plus or minus 5% quantity variance from perpetual balance

Target should be absolute minimum of 95% for MRP/DRP to function effectively; 99% for best-in-class

 Note: Do NOT do a simplified Cycle Count, adding the positives and negatives, then comparing the sum to the total stated inventory.
Example:
Item ABC: Stated Inventory = 100, Cycle Count = 95
Item BCD: Stated Inventory = 100, Cycle Count =105
In this example, if you add the Stated Inventory it equals 200. The Cycle Count sum equals 200 also. This does NOT mean that you have 100% accuracy.
This may sound obvious, but I've encountered many companies that use this method.
If the items above are A or B items, the the actual Cycle Count Accuracy is 0% (Neither item is correct. Both are 5% off)

 

 

 

 

 

 

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Our goal is to guide companies that are looking to optimize their Supply Chain. Originally, we intended on answering questions about Inventory Control, Sourcing, Manufacturing, Distribution and Supply Chain Metrics. However, we currently do not have the resources to answer individual questions.
 If you want to contact me, email me at:
john@supplychainmetric.com
 

For information on Inventory Turns, Fill Rate Measurement, Backorder Reporting or any other Supply Chain Metric, click on the links to the left. The text that appears on this website is the opinion of the webmaster. Metrics may or may not be uniform across all industries. All data listed here may be used as a general guide, but it's accuracy is not guaranteed. Please consult a qualified Supply Chain professional for more details on Supply Chain Measurements.  Other Supply Chain Websites
This site is owned and maintained by Michelle Taras & John Taras CPIM, PMP

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VendorManagedInventory.com -  information on Vendor Managed Inventory
InventoryTurns.com - additional information on how to calculate inventory turns or inventory turnover.
SupplyChainManagementNews.com - News stories about Supply Chain Management
SupplyChainDefinitions.com - various definitions of supply chain terms
SupplyChian.com - various supply chain info (yes, i know it's mis-spelled)
SupplyChainPurchasing - a new site Michelle is developing. All about Supply Chain Purchasing.

Inventory Definition - a basic overview of inventory terms.

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VariousWebsites.com - a weekly review of what's hot on the internet.