What are some of the key inventory management metrics that you monitor and optimize?

Very Important Tool to monitor the inventory and it reflects the cash flows also business does not dent on profit / loss , it affects when cash flows are disturbed , so as a retailer one must be smart enough to rotate the inventory. Remember" Buying is not shopping "

Stock Turnover Rate metric helps calculates how many times your inventory is sold and replaced within a specific period. It helps determine the efficiency of your inventory management by indicating how quickly you're able to sell and restock your products.

Efficient inventory management is crucial for customer satisfaction and profitability in retail. Key metrics include inventory turnover ratio, stockout rate, fill rate, lead time, carrying costs, deadstock percentage, sell-through rate, ABC analysis, GMROI, DSI, supplier performance metrics, stock-to-sales ratio, shrinkage rate, seasonal inventory management, inventory accuracy, EOQ, safety stock levels, backorder rate, inventory aging, and forecast accuracy. Regular monitoring and optimization of these metrics help optimize stocking decisions, reduce costs, and ensure customer satisfaction.

Though metrics at aggregate level remain the same, managing Inventory requires application of specific rules for RM, WIP and FG (incl. service spares). A high ST rate is good for FG, RM and WIP but is reflective of poor quality if applied for service spares! Calculating ST rate for WIP would probably require cost plus value add rather than COGS.

Minimum 4 times you need to turn over your stock if so your organization will be more profitable...in many cases in 3 times..majority end up at only 2

Sell through is a very important metric however it needs to be used with a grain of salt. It needs to be used in conjunction with the raw units sold. For example, an item could sell 10K units but only have a 50% sell through. By looking only at sell through this product could be determined a poor performer. However, it’s possible that the buy was just too big. There is demand for the product and it should remain in the line, but just with a right-sized inventory commitment.

A high Sell-Through rate is welcome for FG. But what if this is high for intermediate inventory? It could signify that rate of loss of inventory is high requiring higher degree of replenishment. It could also mean inferior quality supplies which are resulting in rejections and replacement as a result.

The most important measurements, if the sell through rate is lower you must critically evaluate those styles or products and either avoid repeat ordering the same or focus and try to promote and sell. This is easy profit or revenue if you focus

Sell through is a great indicator for determining whether a specific product needs to be marked down to move it out as planned. I have often found it used as a calculation on units sold through as a definitive metric instead of stock coverage based on the current retail value of the goods, which takes into account markdowns, or turn.

Rejoicing a high GMROI is okay. But reality is that taxes, depreciation, interest & amortization can be significant if financials are not managed efficiently and has the potential to wipe out ROI resulting in negative returns!

This is always aligning with stock turn over ratio. But ideally a good measurements for capital investment..as now building inventory is also an strategy. In that case GMROI and stock turn over ratio will not show positive but in the aspect of sustainability building inventory is crucial

GMROI is a very relevant indicator in stock management. For products with a seasonal lifecycle, like fashion products, it’s always necessary to set a temporary benchmark in order to align products with different recency in stock.

A true KEY Performance Indicator. It is the most concise way to know how well inventory is being managed - both in terms of how long it stays around for and how profitable it is - to allow for solid cash flow.

Sorry about being a devils advocate everywhere! A high as well as low stock-out rate can be indicative of poor warehouse management! The ideal is just in time replenishment and inventory carriage enough to satisfy random stochastic demand. Carrying safety stock or buffer inventories to maintain low stock-out rate is not good business management!

If you're dealing with any form of ecommerce business, whether it's a Shopify store, ebay, or Amazon, general rule of thumb is to have three months of stock on hand at all times. In the digital space algorithms are king. They are designed to route traffic towards products to make sales. If you don't have what to sell, why would the algorithm take traffic to you?

Here are a few more key inventory management metrics that we can monitor for better monitoring and optimizing Inventory: 1. Stock-to-Sales Ratio: This ratio compares your current inventory levels to your sales. It helps identify if you have excess inventory or if you risk running out of stock. By analyzing this ratio, you can take appropriate actions to ensure optimal inventory levels. 2. Lead Time: Lead time is the time taken from when an order is placed to when it is received and ready for sale. Monitoring lead time helps you understand how long it takes for your suppliers to deliver products and helps you plan inventory replenishment accurately.

So long as inventory is static, accuracy is achievable. Unfortunately, static inventory signifies poor turnover! In complex supply chains, a large part of inventory is in-transit or in various stages of value addition. Attributes of the items constituting inventory, are continuously changing and consequently the identity of the items too.

Inventory shrinkage is a sore subject for me, as it is for most people. Shrink rate really depends on how easy it is to steal your product. If you're in jewelry for example, shrink rates are usually pretty high. Whereas if you're in a betting company, much less. My advice, Do what you need to do in order to protect your inventory, show up to the warehouse and announced, higher security guard, put a security system in place. beyond that, the only thing you could do is factor in a shrink rate into the price of your goods. That way you're not losing money at the end of the day.

Shrinkage is going to happen, no matter how hard you try to countermeasure it. Focus on highly motavated individuals with a passion for organization and accuracies in everything that comes across thier area if responsibility. Integrity also comes to mind here.

Inventory management involves several key metrics that can help optimize your inventory levels and improve operational efficiency. Metrics discussed in this article can provide valuable insights into your inventory management practices, helping you make informed decisions about inventory purchasing, replenishment, and overall optimization. Use these metrics in combination with industry benchmarks and historical data to continuously monitor and improve your inventory management processes.