The True Cost of Poor Inventory Accuracy

By Rosita Johnson

The topic of inventory accuracy is very personal to me. For over five years, I was in charge of the team that managed inventory of 65K+ items valued at over $200M. Our team had several different types of positions, ranging from monitoring and adjusting stocking levels to processing daily stock replenishment orders. The team also worked with the engineering team to determine the criticality of materials, identify surplus items and find ways to disposition them, and perform cycle counts. We took pride in our inventory accuracy of over 99% and were diligent about researching variances, most of which were ultimately resolved.

Inventory accuracy is a big deal for many reasons, it can cost businesses millions of dollars in losses. If you are missing inventory, you may end up buying parts you already own because you cannot find them, your inventory tech loses hours looking for an item, and you end up expediting shipments for time sensitive items that are out of stock.

And the fact is that the damage rarely stays “in the warehouse.” Bad inventory data turns into maintenance downtime, schedule slips, excess and obsolete inventory, write offs, shrink, and safety risk when the wrong part or wrong condition gets issued.

If you operate in remote or high consequence environments, such as Alaska’s oilfield, it can have an even worse impact. Limited freight options, long lead times, and weather constraints mean you cannot just “run to the store.” At ASCI, we managed material receipt and inventory across multiple temperature-controlled warehouses on Alaska’s North Slope. In that kind of environment, a small inventory mistake is not small anymore. It turns into downtime, expediting, and missed windows. In the case of our inventory team, some stockouts could lead to millions of dollars of loss in a day due to a pipeline being shut down and not producing oil after a part could not be found for a critical repair..

The Four Accuracy Layers That Actually Matter

Count accuracy

Count accuracy means the system quantity matches the physical count. When it fails, it is almost always because of receiving mistakes, loose issue and return practices, bad labeling, or parts leaving the shelf without a transaction. On the North Slope, we called it “parts walking away.”

Location accuracy

Location accuracy means the item is not just assigned to the right warehouse or yard, it is in the right bin, shelf, bay, cage, or specific yard location. If the location is wrong, the part might as well not exist. And location accuracy is usually the first thing that collapses when teams skip basic move discipline.

Condition and traceability accuracy

This is where the system reflects usable vs in quarantine vs damaged, along with certifications, shelf life, lot or serial tracking, calibration status, and substitution rules. For regulated work, traceability is the difference between being mission-ready and being unable to use the part. If you do not trust condition and traceability, you do not trust your inventory.

Item Criticality

Criticality level matters because it drives stocking levels and reorder points, and it influences how aggressively you expedite when an item is on order. When criticality is defined and maintained correctly, you prioritize what truly protects uptime and safety, not just what is loudest in the moment. When it is wrong or outdated, you either overstock non-critical items and tie up cash or understock critical items and pay for it later in downtime, premium freight, and missed windows.

What Good Looks Like in the Real World

Receiving discipline

Inventory accuracy starts at the door, the moment an item arrives. Match the PO, packing slip, and physical count before anything goes to the shelf. Use a standard process for partial shipments, backorders, and substitutions. Quarantine damaged or questionable items until they are cleared. And keep labeling consistent and standardized, every time.

Cycle counting that is targeted, not random suffering

Use ABC logic and count high-value, high-criticality, and high-movement items more often. Stay on top of repeat offenders, high-variance locations, consumables, fasteners, and returns areas. Separate counting from reconciliation, counting is facts, reconciliation is investigation.

Also, build in segregation of duties. The same person should not be counting, finding a discrepancy, researching it, and then approving it or marking it resolved. That is how errors, and occasionally “creative accounting,” slip through.

Catalog accuracy and master data control

Inventory accuracy is not only what happens on the warehouse floor, it is also what happens in the system. Duplicate items, mismatched units of issue (EA vs BOX), missing dimensions or weights, and poor descriptions make accuracy nearly impossible.

This is exactly why a material catalog matters. A catalog is a complete, systematic list with descriptive details, and maintaining that master data creates better data control, visibility, and inventory accuracy.

Access control and transaction discipline

Controlled access for high value items, defined issue points, and a simple rule: if it is not in the system, it does not move. And do not let returns turn into a catch all area. Clean returns are not glamorous, but they prevent inventory errors from piling up and becoming a bigger problem later.

Turning Accuracy Into Dollars and Risk Reduction

Inventory accuracy is not just a warehouse metric, it has real cost and risk impacts. Here is why:

• Fewer expediting events and less premium freight

• Less maintenance downtime waiting on parts

• Fewer duplicate buys because the team trusts what the system shows

• Reduced inventory on hand through better planning

• Faster picks and fewer time-wasting searches for parts

Accuracy is what turns inventory from cash tied up on shelves into a tool you can actually rely on. On the risk side, accurate inventory supports audit readiness, fewer safety and quality issues, better continuity during turnover (a documented, standardized process beats tribal knowledge), and better surge readiness.

If you want a quick gut check: if a team loses 20 minutes per pick due to bad locations and you do 60 picks a day, that is 20 hours a week of wasted labor, before you even touch overtime or schedule slip costs.

A Quick Self Check

If you do not have solid data on inventory accuracy, or you are trying to understand why it is low, these five questions will get you to the root cause quickly:

• When was your last cycle count, and what did it uncover?

• Can two different people find the same item using only the system location?

• Do you have a clear quarantine process for items with questionable condition?

• How often do you expedite shipments because the system showed stock, but it was not actually available?

• If your best warehouse person left tomorrow, would your inventory accuracy hold up?

How to turn this around

Start with receiving. Tighten it up first and make sure the PO, packing slip, and physical count match before anything goes to the shelf. Next, lock down transaction discipline so items do not move without being recorded in the system. Then clean up your top items by spend and movement so your highest-impact inventory is accurate and easy to find. Cycle count problem locations weekly until things stabilize, then expand from there.

Inventory accuracy is not about perfection; it is about avoiding preventable problems. When inventory is accurate, you spend less on duplicate buys and premium freight, and your team spends less time searching and more time getting work done. That is the real value.

---

ASCI specializes in helping businesses to address supply chain management challenges. Visit our website to learn more and to arrange for a free consultation.