Improving 1-626-836-9261

IQR
Inventory Quality Ratio
Inventory
info@inventoryperformance.com

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

The dollar-driven focus and unique features of IQR have helped
companies worldwide to reduce inventory investment, increase turns,
and improve cash flow. It will assess your potential for inventory
reduction and then show you exactly where to get it. IQR helps
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.

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.
 Improving 1-626-836-9261

IQR
Inventory Quality Ratio
Inventory
info@inventoryperformance.com

Performance

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
Data
E3
Extract
No No
BOHV

Used GG Used Within

Future Planning
In last 12 HH No In last 6 No Yes
Reqmts?
Reqmts? Horizon?
months? months?
KK
Yes Yes Yes

Slow DEF 80 - 15 - 5% A
AB C
C
Moving

Within Within
E1 No Supply
Rule?
E2 No Supply
Rule?

Active Inventory Dollars

IQR = Total Inventory Dollars
Yes Yes

A1 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.

If you like, we can do the demo with your part numbers and inventory dollars. This will:
• Provide you 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.