Efficient picking, packing, shipping of accurate orders on time will keep customers coming back. To make it easy, we’ve broken them down into three sections: sales, receiving, and operational KPIs. The third is the most important, since data is useless without an actionable understanding of it. These numbers draft out a troubling scenario: most of the inventory management professionals are aware that the situation and their work could be improved, and that software could help – but they are not yet sure how to make it happen. Formula: (Cost of Recorded Inventory – Cost of Physical Inventory) ÷ Cost of Recorded Inventory. But you probably won’t—at least, not at first. Need a permanent quality review and regular reordering. If you start losing large amounts of sales because of this metric, your whole business can suffer so it's of utmost importance to put the on-shelf availability on the list of key inventory metrics to measure regularly. We will finish by presenting a business dashboard that will show how those metrics work together when depicting an inventory data-story. Especially in online retailing, where consumers can access massive amounts of products with a few clicks. In an ideal scenario, the time to sell should be as low as possible. KPIs not only provide an … Chapter 6 Inventory analysis: inventory management KPIs to improve performance. When the number is high, it may indicate that your inventory movement is inefficient. In short, be mindful of your carrying costs. Since both cost factor and customer experience are essential in inventory management and for any business, let’s have a look at the top 10 promising inventory KPIs that cater to these two areas. “…KPIs … The idea is to keep inventory flow (inventory in and out) consistent. All this will help you figure out how to improve your processes and enhance efficiency. You may start to recognize patterns and trends, but also bottlenecks and inconsistencies. From the space your … But to understand those aspects, you have to have some way of measuring the performance of different areas of your business. But before we dive into the full list of essential sales KPIs, we need to reiterate the golden rule: You don’t need to track every sales KPI… By Sandra Durcevic in KPIs, Aug 20th 2020. Monitoring Supply Chain KPIs … The higher the number the better. 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. He should effectively collaborate with his peers to coordinate and guide processes together so that they get optimized inventory results. Inventory management KPIs … Answers to these questions and more are essential to understanding all the aspects of your business and its continued growth. 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. 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. When we look at some facts and figures, we find out that for retail, inventory is accurate only 63% of the time on average, or that 88% of supply chain managers estimate that they could reduce inventory levels by more than 5% with improved processes and technology. At the same time, inventory metrics are needed to help managers and professionals in reaching established goals, optimizing processes, and increasing business value. Definition: How efficient your process for receiving stock is. The increase in on-shelf availability can directly impact sales, and do it seriously. The use of online BI tools to set up and track the right inventory metrics they need is a must-do in order to spot out and catch any opportunity as they arise, and conversely, identify problems to fix as soon as possible. So far, we’ve mentioned a few examples of sales KPIs and metrics. This metric is designed to avoid spikes or random drops in inventory and keep a relatively constant flow of stock in and out, based on the business’s needs. If you use correct key performance indicators (KPIs), it is easy to effectively manage your stock to ensure good cash flow, measure the impact of your inventory … What it means: The stock to sales ratio will help you keep your inventory at optimum levels. This is one of the KPIs for inventory control that will provide you with useful information about your storing processes and give you more information on how to develop your procurement strategies. Warehouse KPI Examples #3: Carrying costs The longer inventory stays in the warehouse, the more it costs a business. By using key performance indicators (KPIs) to track and manage inventory, businesses can improve purchasing and production processes, cash flow and profitability. If you have too much inventory, you are tying up capital that could be better spent elsewhere. To start with, a good technique for inventor management is to realize a hierarchy of your most valuable to least valuable items, by dollar value. Last but not least, quality control is of utmost importance for any business, and should be implemented as early as possible. Knowing which inventory KPIs to monitor and understanding what they mean is critical to effectively managing your inventory. When your put-away process is efficient, your lead time is significantly lower. Success indicators. Keeping an eye on your orders' status in real-time will enable your team to act promptly to any potential negative occurrence. Thanks to this little guide to inventory management best practices and metrics, you have some of the keys in hand to have better control over your business and reap maximum benefit. It tells you how hard your 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. All these challenges can be avoided by introducing appropriate inventory management KPIs. These KPIs are influenced by your customers’ actions and they will let you know how your inventory is affected. Conversely, if you have too little stock, you may run out, which is the number one thing not to do for retailers. The aim is to keep your inventory flow in and out, in a relatively consistent manner. When the weeks on-hand is high, it means that your inventory is not moving efficiently, which results in a lower profitability due to storage fees and tied up capital. Inventory metrics can be common to different industries, and it is no surprise that you can identify one as a logistic KPI, but also see it listed as a retail KPI for instance. 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. Simple and straightforward: you need to know what you have in stock and what is passing through your warehouse. How do you measure inventory performance? For example, a low inventory turnover spurs you to track down a reason and helps you improve 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. Our groundbreaking open source order management software will blow your mind. Essential SaaS trends and insights for 2021 and beyond. Try to keep this ration over 92% as much as possible. This inventory management KPI is crucial to monitor accurately at all times since it will show you if your production should be increased or decreased to keep the balance between income and expenses. If you sell large ticket items, they typically move slower than lower-priced products. Managing Partners: Martin Blumenau, Jakob Rehermann | Trade Register: Berlin-Charlottenburg HRB 144962 B | Tax Identification Number: DE 28 552 2148, News, Insights and Advice for Getting your Data in Shape, BI Blog | Data Visualization & Analytics Blog | datapine. Other potential KPIs… It is a good indicator when it comes to efficient production planning, process, marketing, and sales management. Average inventory – The average inventory KPI is used to estimate the inventory your company has on hand during the predefined time.