Any serious company that wants to increase revenue and profits, needs to evaluate demand and act accordingly, meaning keep products on shelves, visibly accessible, and easy to reach. Inventory management KPIs are important because they are used to track warehouse performance and how inventory is ordered, managed, and commissioned. A low or dropping inventory to sales ratio. Events that cause inventory to be exhausted should be avoided at all costs, although it can happen that some products are not available due to numerous reasons. We have here a good illustration of inventory management performed with the help of business intelligence and data visualization: the performance metrics that matter to the supply chain manager are tracked and displayed on a professional dashboard. “…KPIs … Data consolidation and analysis is simple, thanks to the intuitive drag and drop interface. In this case, we can see inventory measurement metrics such as the inventory to sales, turnover, carrying costs, accuracy, and the percentage of stock items on a dynamic, online data visualization overview. In this article, we will take a closer look at the inventory management: what are the performance indicator that can help, how to choose them, and outline some inventory metrics examples as well as best practices. Besides, a satisfied customer often refers you to friends and relatives, an act much more powerful than any witty advertisement you can make. These storage & inventory management KPIs are of immense value when it comes to maximizing storage utilization and reducing cost of inventory. What it means: Your sell through rate tells you the percentage of your available inventory that actually sold. Definition: The ratio of stock available for sale versus the stock that has been sold. All Rights Reserved. Sales KPIs Once it is done, it smoothens the overall management and adds value, which is often is appreciated by senior management and investors. To be specific, you can see afternoons have a particular spike that will enable you to solve these issues and prepare for the future much better. What it means: This KPI, when excessive, may mean that you have a problem with inventory damage, theft, miscounting, or supplier fraud (when a supplier bills for more products than it sends), and that a thorough investigation should be performed. The most popular inventory KPIs, on the other hand, are inventory-to-sales ratio, rate of sale, weeks of supply, open-to-buy, average inventory, and inventory turnover rate. Now that we have gone over some metrics, let's have a look at how it looks like on real-world examples and dashboards. Usually, carrying costs amount between 20% and 30% of the company's inventory value, and this significant percentage makes it an essential factor to account for and monitor closely. To effectively evaluate your supply chain metrics strategies, you need real-time access to the status of your orders: if the products are shipped, received, in the packaging process, or canceled. But it’s essential to be able to put a quantifiable number in … Collecting big amounts of data is not the only thing to do; knowing how to process, analyze, and visualize the insights you gain from it is key. These costs can include warehousing costs, insurance, employee costs as well as damages of goods, rent, utilities, etc. We will finish by presenting a business dashboard that will show how those metrics work together when depicting an inventory data-story. What it means: This KPI tells you how fast you are selling your inventory. Extracting, analyzing, monitoring and reacting to relevant inventory … Some studies state that even just a 5% increase in customer retention will bring between 25 to 100% in profits across a wide range of industries. Within each section, we will define the specific, standard inventory KPI, tell you how it’s calculated (inventory KPI formulas), and what it each metric tells you about your stock, processes, or sales. But let's get back to our visual example. To see how you can benefit from BI software, simply try out our 14-day free trial! To master the art inventory management, here are a few tips. Examples of your current liabilities are debt and account payables. This helps managers identify monthly increases in inventory against falling sales. But not only, as analyzing this metric with the help of online business intelligence software will enable you to quickly examine where you can make changes in order to reduce costs (as the carrying costs are a large part of the total costs, as mentioned). Formula: (Cost of Recorded Inventory – Cost of Physical Inventory) ÷ Cost of Recorded Inventory. In our inventory KPI example illustrated above, you can see that the end of the working week has the highest percentage of out of stock rates. GMROI is a bit intimidating, but it is one of the most important metrics you can use in your store. What it means: This KPI tells you the time period that it takes for your inventory to convert into sales. 4 MIN READ. So far, we’ve mentioned a few examples of sales KPIs and metrics. To be successful in this position, it is important to have extended knowledge of the supply chain principles – but it is today equally important to have strong analytic skills. When you need to reduce your cost of carrying inventory, it’s important to reduce your inventory by eliminating obsolete, slow-moving, or dead stock inventory. Definition: Shows how well you stock products that customers demand. This visual will enable you to create an effective data-story that will translate into positive business results since you will save time in the analysis process and increase productivity. To choose the most reliable and efficient inventory management metrics, here are some tips that you need to take into account: Once you have chosen the inventory metrics that will best fit your business and your needs, let’s go over some examples to illustrate them, as well as some best practices to observe. Meeting customers' demands is critical in successfully managing your company's inventory, especially in the FMCG industry. 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