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What is Inventory Accuracy and How to Track It Effectively?

March 23, 2021

6 min read

According to a report by Mckinsey, 27% of retailers plan to have higher inventory along the supply chain. The post-COVID times have boosted the eCommerce and D2C industry, and sellers like you are now amping up their stock to match the increasing demand and high competition. But, is increasing the inventory enough if you can’t manage it accurately? You need measuring parameters like inventory accuracy to ensure that you don’t miscalculate any inventory. 

Let’s look at inventory accuracy to understand the concept and detail to see how you can maintain and improve it for your eCommerce business. 

What is Inventory Accuracy?

Inventory accuracy refers to any discrepancies between the actual stock quantity or type of inventory you have and what is recorded. In the context of a physical store, this could refer to the difference between the recorded list and the amount displayed on shelves. In contrast, for eCommerce businesses, it could refer to the recorded inventory and the inventory stored in warehouses of my film and centers or fulfillment centers.

For example, if you have recorded 10 units of a particular SKU, and there are only five present in stock, you will not deliver the right product to the customer in time. Not just this, it will have many other implications that you might not realize immediately. It could also disturb the whole supply chain if this inventory is not accurate and the discrepancy is enormous. 

Why is Inventory Accuracy Important? 

Inventory accuracy is crucial because it could lead to incorrect customer orders, accumulation of debt stock, or even business loss. You might have to face the unfortunate inventory stock situations out where your customers order something, and you do not have it in stock while it is displayed on your website. It could also cause substantial accounting issues as it could lead to inventory shrinkage and throw off your inventory valuation at the end of a financial year. 

Incorrect Inventory Accuracy – Why do eCommerce Businesses Struggle?

Inventory accuracy becomes a concern for eCommerce businesses as not all inventory is visible transparently at all times. So there are higher chances of the inventory not being accurate at all times. Many businesses face unfortunate inventory stock situations out, and customers do not agree to bank orders causing a lot of negative experiences and feedback. A few reasons for incorrect inventory accuracy could be –


Suppose you manage your inventory yourself and store it in your own house or warehouse. In that case, the chances of incorrect inventory accuracy are high as you do not deploy the most optimum sources of carrying out the processes manually. As the eCommerce group business grows, the inventory also keeps increasing. Therefore, self-storage is not the wisest option to go with. 

No Inventory Management Software

One of the biggest reasons for improper inventory accuracy is the absence of inventory management software. An inventory management software helps you maintain sync between your inventory and orders. This way, you can easily maintain a record of your SKUs and constantly track your inventory to ensure that no product is out of stock. If you do this process manually, it can take you a lot of time and cause many unnecessary errors. 

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How to Measure Inventory Accuracy?

Inventory Reconciliation – Physical Counting

Inventory reconciliation refers to comparing physical inventory count with the record of the inventory in hand. This basic process helps reduce the stock discrepancies and also lets you understand why these discrepancies are rising. It is a very deep Jale down into the inventor you have and is usually not suitable if you have a large stock count. You can carry out this process regularly if you have a low SKU count and a lower order volume. 

Inventory Valuation

Inventory valuation refers to the method of inventory accounting. It is done by counting the value you have at hand and then dividing it by the value of inventory that you are supposed to have. This method is not the most approximate as it does not compare every item with your physical inventory but gives you a decent idea, and if it is low, you must contact your team to talk about the sales receipts and records. 

How to Improve Inventory Accuracy?

Outsource to 3PL Fulfillment Providers 

The easiest and fastest way to improve your inventory accuracy is to outsource it to 3PL fulfillment providers. 3PL fulfillment providers will take care of the inventory you sent to them and ensure that they are on track with the incoming orders. This will let off some steam from your shoulders. You will focus on other aspects of your business rather than just managing your inventory and removing any discrepancies.

One such fulfillment provider is Shiprocket Fulfillment. Shiprocket Fulfillment helps you manage inventory and incoming orders and stores stock in its thoroughly equipped fulfillment centers. You can store products closest to your buyer’s location in warehouses across India and deliver products 3X faster with 99% order fulfillment accuracy. 

Upgrade Inventory Management System

You can also improve your inventory accuracy by deploying an inventory management software or system so that you can track your inventory regularly, and it is visible at all stages of the supply chain. This will give you a deep insight into the orders and the stock you have, and you will be able to decide which SKU is most in-demand, and you will be able to remove any discrepancies as you will be checking data in real-time. 

Conduct Random Inventory Checks 

The next step to improve inventory accuracy is by conducting random inventory checks using inventory reconciliation. If you do these checks at regular intervals or randomly, they will give you an accurate picture of the inventory you have in hand and what the records suggest. Try to match these two entities so you can maintain high inventory accuracy. 

Final Thoughts

Inventory accuracy is a very important KPI to track since it tells you about the physical stock that you possess. Situations like inventory stockout can lead to a heavy loss and customer experience, and you might even lose out on customers as they would not receive orders on time. Therefore, constantly keep a check on your inventory accuracy and ensure that your inventory is taken care of at all times.

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