M O R D I A D I

I recently read the ebook Smarter Inventory Drives Sales. It was a standard inventory approach with a lot of complex terminology to describe simple things, but one thing stood out. Inventory accuracy reality and perception were vastly different. The article quoted an Auburn University study in which back in 2005, before many retailers had an online presence, most thought their inventory accuracy was far higher than it actually was:

Nearly all retailers truly believed that they were at 95% plus Inventory Accuracy, and why wouldn't they? Online customer visibility was in its infancy and the term omnichannel was barely invented.

Why mention online sales? It's a painful process to sell online only to give back money because a product doesn't exist on the shelf. Stores upped their inventory game tremendously when they began selling online. My store is in that situation a little bit with our Magic singles, Our singles inventory is weak, because we have weak tools and weak processes. The metrics associated with failure are hard. We regularly bribe customers when our inventory is off. Although we're at 99.4% positive feedback, we were told we couldn't sell internationally because the standard is 99.5%. Rather than the soft metrics of back peddling with a brick and mortar customer, when you're out online, it results in bad feedback and less sales in a more direct manner.

For those of us, like me, who don't do significant online sales, we're back in that pre 2005 study territory, thinking we have a high degree of accuracy (95%+) when in reality, the study finds, accuracy is much lower:

Accuracy is somewhere in the 65-75% range. A few still cling to the decade old belief that they have 85% or higher exact match Inventory Accuracy.

This means the value of a retail store should be considered lower by at least a third. If you were to buy a store or put yours up for sale, the assumption of inventory value would immediately start at 65% of whatever you think is there. I think adding even a modest online component may increase the value of the business, if for no other reason than it denotes a higher inventory accuracy of around a third. This assumes this is all understood by a buyer or broker. In any case, if I were buying a business, I would assume 35% of the stores stated inventory is smoke and mirrors.

Rather than claim high accuracy, test this yourself. Do an actual inventory with no excuses. Don't do a regular inventory, do a random check. There are a lot of excuses when you get down to business on why things are wrong. You may have known they were wrong in the back of your mind, like many things in a store that are out of place. It's just a database after all, why sweat accuracy? But remember, you pay taxes based on the accuracy of that data and customer satisfaction is tied to product availability.

Inventory 100 random items. Do a spot inventory. The way I did this was dumping my inventory from my POS to an Excel spreadsheet. In the column next to each item, generate a random number and copy that cell down through your entire inventory. This is the only way to really check, as a standard inventory process is too subjective. Here's an article on how to generate that random number. Now sort your inventory based on the random number column and inventory the first 100 items.



What did I get? Well, how do we measure? If we measure missing items, it's one number. If we measure incorrect entries, it's another. Both were pretty close for me at 85%. I was certainly in the camp claiming 95%+ accuracy before doing this. I already had what I thought was a robust inventory process in place, but I reiterated the need to get this work done to managers and staff and put a monthly 100 random item check reminder on my personal calendar.

This measurement of progress should help improve performance. Doing a regular inventory is clearly not good enough. Give it a try and let us know what you found. There's no shame in admitting you have a problem if you're going to fix it.