The majority of businesses assume that their inventory data is either "correct" or "incorrect".
But there is another category that can cause numerous problems within operations:
Stale inventory data.
There is a "use-by date" for all inventory information.
As soon as any movement is made with inventory, sales are made, goods are transferred in or out, receipts are recorded, or any adjustment is made to the data, then value of the existing inventory data begins to decrease.
This then raises an important question:
How old does inventory information get before it is no longer valuable to an operation?
For many businesses, inventory reports are generated:
Daily.
Weekly.
Monthly.
It is possible that the inventory reports generated were actually correct at the point of creation.
The problem is that operations don't stop while the reports are in transit, or while someone reads them and makes a decision. The time that passes between creation of the report and when someone makes a decision based on it, is time that passes that has made the data on the report a lie.
The unseen cost of stale data.
Many businesses focus a great deal of effort on ensuring that their inventory data is "accurate."
Stale inventory data causes a lot of the same problems as "inaccurate" inventory data. For example:
A manager pulls a report that shows that there is "500 units on hand." It was factually correct 3 hours ago when it was run. However, 300 units have already been sold over that period. When the manager makes a purchasing or production decision based on that information, it is already flawed. This can result in stockouts or the overselling to a customer.
Inventory decisions are "time-sensitive."
Compared to most other business metrics, inventory is different. Revenue reports, for example, can typically be reviewed and analyzed at any time. However, inventory decisions often need to be made immediately. Purchasing decisions, fulfillment decisions, transfer decisions and production decisions all are based on current inventory information. As that information stale, a bad decision is likely to be made.
Why real-time inventory visibility is crucial.
The most successful businesses that excel in inventory performance focus on minimizing the time span between:
A physical event and...
A system update.
The shorter that gap, the more valuable the inventory information becomes to an operation. Real-time inventory visibility provides faster decisions, better forecasts, and customer satisfaction. The idea is that the uncertainty is reduced because we know that our data is up to date.
The goal is not "perfect" accuracy.
It seems that every operation wants "perfect" inventory accuracy. However, more times than not, "current" inventory information is often more valuable to an operation than "perfectly accurate, stale" information.
The best systems will provide both speed and accuracy.
Final Thought.
Inventory information gets stale.
The question isn't if your inventory information is accurate, but if your inventory information is relevant at the point you make a decision.
Here are more articles about inventory visibility and operational efficiency:
https://theinventorymaster.com
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