Monitor Efficiency

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Operational Level 4 - Monitoring Efficiency

Now that we understand howSKUs Counted and SKUs Changed make up Mango's Level 4 - Efficiency metric, let's see how to monitor efficiency using two pages in your Charts.pdf (Review Reports email). The Inventory Accuracy Scorecard shows your store's SKUs Counted and SKUs Changed percentages along with the calculated Level 4 - Efficiency metric. The Shrink & Efficiency Trend chart allows you to see SKUs Counted and SKUs Changed in a historical month-by-month trend and gives you tracking and targeting details.

Example A

This example shows a store achieving Level 4 - Efficiency along with very good IRA and other operational level metrics. The examples below are taken from the store's Charts.pdf (Review Reports email).

The Inventory Accuracy Scorecard (above) shows both SKUs Counted (29%) and SKUs Changed percentages (11%). The store's Level 4 - Efficiency metric calculates to 99% which is above the Level 4 threshold of 95%. Take note of the store's excellent Level 1 - IRA metric of 88%. The scorecard reads like this: over the twelve trailing months (TTM) this store has counted 29% of its countable (non-excluded) SKUs, and 11% (a little more than 1 in 10) of the store's SKUs received a quantity-on-hand change (variance). The store counts every SKU on its Count Sheets (Level 0 - Completion ), exhibits a Level 1 - IRA of 88% (a random inventory file sample), has very reasonable Level 2 - Dollar Accuracy and Level 3 - Shrink when high-risk SKUs are counted with its Count Sheets and Shooting Outs processes.

If we look at the chart in the store's Shrink & Efficiency Trend page, we see October through January were higher counting and changing months:

Bullet #1 - SKUs Counted, around 1,000 (black line, right axis)
Bullet #2 - SKUs Changed, 350 - 450 (light-blue line, right axis)

Since October, counting and changing have slowed to around 600 SKUs Counted (bullet #3) and around 200 changes (bullet #4). Take notice of bullet #5: here we see an inversion in typical variance (change) behavior. Here we see more inventory swell (changes up, purple line) than shrink (changes down, maroon line). We also see +$1,051 in inventory dollar swell (blue bar, left axis), which indicates an unusual event. Many times this can indicate a receiving problem where a PO is not created and inventory on hands are added directly. When we telephoned the store to find out more, the inventory coordinator said this behavior was a result of a back stock purge taken in April. Purging back stock is part of Mango's Accuracy Cadence and it can result in variance signatures like this due to the amount of inventory discovered in the back room and top shelves. The inventory coordinator also informed us they perform cashier testing twice a year and credit that, along with strict variance research to their continued accuracy success.

If we look in the Efficiency section of the store's Shrink & Efficiency Trend page (above), we see the store has counted 6,929 SKUs over the twelve trailing months which is about 2,500 fewer SKUs than the maximum Level 4 threshold (target) of 9,463. During the same time period, the store made a quantity-on-hand change to 2,705 SKUs, about 800 fewer variances than the maximum Level 4 threshold.

Example B

The example below shows a typical store struggling with accuracy leaks. The organization is deploying enormous labor to counting SKUs and those counters are changing quantity-on-hand on nearly 1 in 4 SKUs! However, (and no surprise) instead of creating accuracy, all this counting labor is resulting in a substandard Level 1 - IRA metric of 67%.

The store's Inventory Accuracy Scorecard shows 78% SKUs Counted, 23% SKUs Changed and the resultant Level 4 - Efficiency metric of 55% is well below the goal of 95% and above. The scorecard reads like this: over the twelve trailing months, the store has counted 78% of its SKUs and 23% (nearly 1 in 4) SKUs have received a quantity-on-hand variance. The store counts only 60% of the SKUs on its Count Sheets, has IRA of 67%, Dollar Accuracy cannot be calculated because Level 0 - Completion is low and the store's Level 3 - Shrink metric is over 3 times the goal of -0.5%. This is a classic case of a store deploying enormous labor to count SKUs (78%) but does not deploy enough labor to root processes that detect and reduce accuracy leaks.

If we look at the store's Shrink & Efficiency Trend page we see significant and consistent shrinkage (blue and yellows bars, left axis) along with tremendous quantity-on-hand changes (lines, right axis). Chart notes:

Bullet #1 - the black SKUs Counted line is off the chart for the entire year. This means the store is counting over 2,400 SKUs each month!
Bullet #2 - counting and changing was especially heavy during the January through May time period.
Bullet #3 - look at the distance between the Changes Down (maroon line) and Changes Up (purple line), this distance signifies a large number of SKUs with downward variances (associated with shrink) and when combined with the shrink dollar bar (blue and gold bars), indicates a large inventory value reduction throughout a wide breadth of SKUs.

In the Efficiency section of the Shrink & Efficiency Trend page, we see the store has counted 17,820 SKUs, almost twice the Level 4 - Efficiency maximum target of 9,164 SKUs for this store. Furthermore, the store has made nearly 2,000 quantity-on-hand changes (5,271) above its maximum Level 4 - Efficiency threshold (3,337).

In a case like this, we recommend the store stop its widespread counting practices immediately and institute Mango's best practices including designating an Inventory Coordinator, and cashier training and testing, and then start working on its Operational Level checklists, step by step.

Example C

Example D

Print the Level 4 Checklist here!
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