IQR

Inventory Quality Ratio

1-626-836-9261
Improving
info@inventoryperformance.com
Inventory
Performance

Move beyond planning inventory quantities . . .

to actually managing inventory dollars with
IQR
The Inventory Quality Ratio (IQR) is a proven technique for improving inventory performance and working capital. The
IQR logic was developed by 35 materials managers and works with any MRP, DRP, ERP or SCM system.
The IQR inventory reduction application is the only software developed specifically for analyzing inventories and
identifying reduction opportunities. It is used by planners, buyers, operations managers, and controllers in a broad range of
manufacturing and distribution environments. IQR software provides the information and the tools you need to:

Quickly identify good, bad and excess inventories Better manage

financial reserves and avoid future write-offs Enhance the
effectiveness of ERP systems with a dollar focus Avoid shortages of
parts and finished goods
Drill down on problem areas and prioritize corrective action Measure
performance by inventory segment (program, plant, etc.) Balance
inventory across plants
Set realistic reduction objectives and track improvement over time
Monitor inventory movement as requirements change
Revise safety stocks, lot sizes and order quantities Cleanup
data errors and omissions in host system

and unique features of IQR have helped

educe inventory investment, increase turns,
It will assess your potential for inventory
reduction and then show you exactly where to get it.
everyone work smarter, not harder.

This exhibit is typical of the result at our

sites (green inventory is good!). Note that
most of the inventory reduction is in Excess
2 (yellow) indicating improved cash flow.

IQR helps

Best of all, implementation and training are completed in only three

days and no additional data entry is required.
IQR International is a software development company specializing in inventory management for the manufacturing and distribution industries.
We provide inventory reduction and inventory management tools based on the Inventory Quality Ratio (IQR) methodology.
IQR International has over 300 site installation in 20 countries around the world. Our customers range from under $50 million in sales to
multinational Fortune 100 corporations. We serve a broad range of industries and manufacturing environments, including automotive, capital
equipment, industrial and consumer products, electronics and high tech, pharmaceuticals, chemical and food processing, and maintenance and repair
operations.
We are proud to include among our customers: Armstrong, ArvinMeritor, Beckman Coulter, Black & Decker, Boston Scientific, Carrier
Corporation, Cummins, Dana Corporation, Dow Chemical, Eastman Chemical, Esterline, Hyundai, Johnson & Johnson, Kohler Company, Motorola,
Newell Rubbermaid, Pfizer, Rheem Mfg, Telex Communications, Tyco Electronics, United Technologies and many smaller companies.

IQR

1-626-836-9261
Improving
info@inventoryperformance.com
Inventory
Performance

Inventory Quality Ratio

Move beyond planning inventory quantities . . .

to actually managing inventory dollars with
IQR
As shown below, the IQR logic divides inventory into three groups: items with future requirements, items with no future requirements but with recent
past usage, and items with neither. The items in these groups are then stratified into typical ABC-type classifications based on their future dollar
requirements (ABC), their past dollar usage (DEF), or their current dollar balances (GHK), respectively. A target inventory level or rule is set for each
item based on its classification. The balance on hand of each item is compared to the rule, and the dollars of each item are categorized as either
Active (A1 or A2), Excess (E1, E2 or E3), Slow Moving (SM) or No Moving (NM). These are called the inventory quality categories.

IQR Logic
MRP / ERP
No
Moving

E3

Data
Extract

No

BOHV

Used
In last 12
months?

G
H
K

No

No

Used
In last 6
months?

Future

Yes

No Reqmts?

Within
Planning
Horizon?

Yes

Yes

Yes

DEF

Slow
Moving

E1

Within
No Supply
Rule?

Inventory Dollars
IQRActive
=
Total Inventory Dollars

Yes

A1

80 - 15 - 5%

E2

ABC

No

Within
Supply Chain
Role

Yes

A2

1992-2008 IQR International, Inc.

The Inventory Quality Ratio is the ratio of the active inventory dollars to total inventory dollars. In a theoretically perfect situation (i.e., with no
excess, slow moving or no moving inventories), the IQR would be 100%. Using very generous inventory rules of 4-12-24 weeks of supply for A-B-C
items, respectively, the IQR for most manufacturing companies is in the 30% to 45% range (with the exception of the automotive industry). This
means that approximately 60% of their inventory dollars are tied up in excess, slow or no moving items. Slow and no moving inventories account for
about 10% of the dollars and one category, Excess 2 (E2), typically accounts for 30% to 50% of the total inventory dollars. Most companies using the
IQR lean logic today are using rules that are much more aggressive, like 2-6-12 weeks of supply or even 1-3-6 weeks of supply. This simple logic
works with any MRP or ERP system and is being used by discrete and process manufacturers, operating in BTO/BTS/CTO, lean, pull and demand flow
environments.
Regardless of the systems being used or their manufacturing environments, planners and buyers find it difficult to control inventory investment
without a dollar focus. The IQR lean logic uses both future requirements and past usage, along with dynamic demand- driven ABC classifications
and user-defined rules to manage inventories with a dollar focus. You and your colleagues can see the details of this inventory management
technique and the benefits of IQR software with a remote demo over the internet.

your part numbers and inventory dollars . This will:

with a comprehensive analysis of your inventories,

Likely point out immediate opportunities for significant savings, and
Demonstrate the benefits of using IQR along with your current system.
You really have to see the IQR logic with your inventories to appreciate what it can help you do. We have interface programs already available for
most MRP and ERP systems.

For more information about IQR software, our remote demo, or a free analysis of your inventories, just call us at
626-836-9261 or email Doug Howardell at dhowardell@InventoryPerformance.com.