 Inventory Accuracy - Supply Chain Metric

# Inventory Accuracy - Supply Chain Metric

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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)