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other organizations believe that they are approximately achieving inventory accuracy in the 90%
range based on cycle counts or other such methods. In any case, these are often more optimistic
guesses than real facts. In this analysis, most items will be tagged after 7 years after the majority
of the items have been through the process after the AIT system is being used. The Physical
Inventory row is calculated by multiplying the Inventory Accuracy row by the System Inventory
Count. The Shrinkage Count is merely the difference between the System Inventory Count and
the Physical Inventory. The Average Item Value is an assumption. Altering this value can
significantly change the results. The next information considered is the Material Handler hourly
rate, Time Searching, and Labor Cost rows. The analysis assumes that material handlers are the
laborers that look for items if they are presumed missing. Therefore, the material handler and the
associated hourly wage are used in this analysis. The Time Searching is an assumption for how
long the material handler is given to find a missing item. Thus, the Labor Cost is calculated by
multiplying the Material Handler hourly rate by the Time Searching. The Average Cost for
Shrinkage is calculated by using the following equation:
Average Cost for Shrinkage=[(Shrinkage Count)(Average Item Value)+(Labor Cost)(Shrinkage
Count)
The Savings are calculated by subtracting the Average Cost of Shrinkage when using an AIT
from the Average Cost of Shrinkage for the current paper-based process.
41000 41000 41000
99.997% 99.000% 99.000%
40998.77 40590 40590
1.23 410 410
$1,500.00 $1,500.00 $1,500.00
$15.44 $15.44 $15.44
0.49 0.49 0.49
$7.57 $7.49 $7.49
$1,854.31 $618,070.24 $618,070.24
Labor Cost Labor Cost Labor Cost
Time Searching
Material Handler Wage
Time Searching
Material Handler Wage
Time Searching
2D Barcodes
System Inventory Count
Inventory Accuracy
Physical Inventory
Shrinkage Count
Average Item Value
Average Cost of Shrinkage
RFID
System Inventory Count
Inventory Accuracy
Physical Inventory
RFID + 2D Barcodes
System Inventory Count
Inventory Accuracy
Physical Inventory
Savings Savings Savings
Shrinkage Count
Average Item Value
Average Cost of Shrinkage
Shrinkage Count
Average Item Value
Average Cost of Shrinkage
Material Handler Wage
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