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FAQ - Where does the 98% accuracy figure on the ABCD checklist come from?

The figure of 98% accuracy comes from feedback from users of ERP systems in all types of businesses. 98% is the economic break-even point for an integrated planning system. The reality is that the extra work necessary to maintain accurate inventory records (e.g. cycle counting) and bills of material (a bill of material administrator) is more than offset by the reduction in work when people are not looking for parts that are not there or ordering parts that are not needed. Most of the changes necessary are not expensive but are changes of attitude and culture. Getting everyone to realise that every single data error potentially sends people on a fools errand is a critical success factor. High level performance measures related to data accuracy is another success factor.

In the early 80's the target accuracy was 95%. In those days it was sufficient to work to week ending dates and lead times were longer. 98% is a minimum standard for everyone these days. Companies in the more demanding industries, repetitive manufacture in particular, find 98% is not sufficient to reach world class standards of performance.

What data do we mean? Inventory or stock record accuracy and bill of material accuracy are top of the list. Routing accuracy is needed for capacity requirements planning and cost rollups. Once the culture of data accuracy is established then accuracy of all data including basic material master data, customer information, supplier details etc. will follow to everyone's advantage.

It often needs outside references and sources of information to put across this basic message.

Jargon Warning - If you are not familiar with any of the terms used above, you can look them up in the free Jargon Buster on this site or, for more details, purchase the book "Business Excellence". Business Excellence is available in e-book format in addition to the paperback and is a component of the ERP Class "A" toolkit which you can also purchase and download from this site. Click here for more details.

 

You can now buy our Stock Record Accuracy course on CD - click here for more details