Understanding IRA

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Level 1 - Understanding IRA
IRA is a measure of your store's quantity-on-hand accuracy. Unlike Dollar Accuracy or Shrinkage, where an item's cost is taken into account, IRA focuses narrowly on quantity-on-hand (QOH). QOH accuracy is vitally important to day-to-day operation because computer-generated orders and in-stock position are dependent on correct QOH. Confidence is also necessary when researching root quantity-on-hand variances as it is difficult to sniff out theft and errors when we do not trust a SKU's initial QOH. For this reason, we like to see an IRA metric of 80% or better (8 out of 10 QOH's match the computer when counted).

What if IRA shows "??"

How is IRA measured?

Where is IRA measured?

Accuracy basics

The basics of QOH accuracy (IRA) are quite simple: add to QOH when a product comes in the back door and subtract from it when it goes out the front. Assuming QOH is accurate to begin with, and there are no shipping errors, receiving errors, cashiering errors, counting errors, nor theft, then QOH will always be perfectly accurate. But this is rarely the case in the real world, so where do things go wrong?

Inaccuracy is usually blamed on theft, but a close analysis of QOH variances show that most errors are caused by our own hands. In fact, a third of all variances are not theft (shrink), but the opposite, called "swell". There are only two conclusions to be drawn by this up/down behavior 1) thieves have guilty consciences and after are stealing thousands of items, are putting them back on our shelves or, 2) our own employees are at fault by causing then correcting errors that makeup of two-thirds of all store variances! So if it is mostly our own fault then what's going on?

Top causes of inaccuracy
Stores struggling with IRA are usually focused too much on counting and "fixing" QOH and focused too little on root accuracy processes such as cashier testing, careful counting and variance research, and high-standards department maintenance.

#1 Sloppy counting, cashiering and department maintenance

Cashiers - without specific training and testing, one-third fail to scan simple basket correctly.
Counters - inaccurate counters if left to their sloppy behavior will do more harm than good. Variance research is the only way to determine the good from the bad.
Back stock - SKUs with back stock are difficult to count unless clearly marked as such.
Departments - if a department is sloppy then so will its counts. Each SKU needs a scan tag and be in its proper home.

#2 Excessive Counting
Abundant cycle counting and/or full physical inventories, the traditional way of obtaining and maintaining accuracy tends to make things worse by introducing significant variance noise that it is impossibly overwhelming to perform careful root-cause research. There is no correlation between a store who counts a lot and its IRA (in fact, there is a slight inverse correlation).

Excessive counting masks the root cause of inaccuracies.
Excessive counting is not correlated with accuracy and is, therefore, an inefficient use of accuracy labor.

#3 Theft
Every store experiences theft, in fact two or three items are stolen each day we are open. Our margins and store operations (processing Count Sheets and Shooting Outs) compensate for this. However, when theft goes beyond a couple of items a day then things can get out of hand quickly and it can cause real business health issues. The risk of professional theft is real (many times it is internal too) so it is imperative to have tight inventory control, confidence in initial QOH, and relentless variance research. But it is difficult to detect theft with low IRA and it is made worse by a lot of sloppy cashiering, counting, departments, and variance noise caused by overabundant counting.

Too many errors mask true theft
Too much counting and "fixing" create too much variance noise and masks theft

Bottom line: if your store has a root accuracy issue like inaccurate cashiers or sloppy departments then counting a SKU once or twice a year will not be sufficient to maintain its accuracy or discover procedural or personnel issues and detect theft. However, when you tighten up your procedures and work with your staff on accuracy, the error rate will be cut considerably and great IRA can be sustained!

Mango's Level 1 Checklist will guide you through establishing these tight procedures to get your store in shape for accuracy! The first step is to assign someone to head up the challenge. This person is called the Inventory Coordinator (IC) and will be responsible for guiding your store through the checklist. The IC does not have to be a full-time position, rather it is a role assigned to an assistant manager or another employee who exhibits good inventory skills.

Print the Level 1 Checklist here!
Next Step - Assign the IC Role
Previous Step - Operational Level 1