You’re struggling with inventory management. What are the most important metrics to track?

Inventory Turnover Ratio: Measures stock turnover speed. Stock-Out Rate: Tracks instances of inventory shortages. Inventory Accuracy: Ensures records match physical inventory. Carrying Costs: Evaluates expenses related to inventory holding. Lead Time: Measures time for inventory replenishment. Fill Rate: Tracks completeness and timeliness of orders. Deadstock Levels: Identifies obsolete inventory. Supplier Performance: Evaluates reliability and responsiveness. Demand Forecast Accuracy: Compares forecasts with actual sales. Customer Satisfaction: Measures feedback on inventory availability.

There are a few key metrics that are essential to track to manage inventory effectively. These include inventory turnover ratio, days of inventory on hand, fill rate, and backorder rate. The inventory turnover ratio tells you how quickly inventory is sold and replaced. Days of inventory on hand tells you how long it takes to sell your inventory. The fill rate is the percentage of orders that are fulfilled without backorders. The backorder rate measures the number of orders that cannot be fulfilled due to stock-outs.

Es un indicador poco valorado y que da una clara visión de la gestión del inventario. IRA (Inventory Record Accuracy) ha sido en mi experiencia el indicador por el cual he detectado: fraudes, negligencia, desvíos y malas prácticas La gestión en tiempo y forma del inventario incrementa el % de IRA, cada punto porcentual menor a la totalidad es reflejo de alguna deficiencia en el proceso o en la operación, no hay duda en que este indicador garantiza eficiencia y mejora continua Determina tu IRA e implementa el plan de contención o remediación que contribuya a llegar a un 100%

Inventory turnover measures how efficiently a company uses its inventory by dividing the cost of goods sold by the average inventory value during the period. Inventory turnover ratios are only useful for comparing similar companies, and are particularly important for retailers. A relatively low inventory turnover ratio may be a sign of weak sales or excess inventory, while a higher ratio signals strong sales but may also indicate inadequate inventory stocking. Accounting policies, rapid changes in costs, and seasonal factors may distort inventory turnover comparisons.

Inventory turnover measures how quickly a company sells and replaces its inventory. It's calculated by dividing the cost of goods sold (COGS) by the average inventory value. A high turnover suggests efficient sales and inventory management, while a low turnover indicates potential issues like overstocking or under-selling. Aim for a balanced turnover that aligns with demand and supply cycles.

This can't be overstated. Inaccurate inventory data leads to a domino effect of problems. Knowing exactly what you have on hand ensures smooth fulfillment, avoids stockouts, and allows for better forecasting.

Accurate inventory data is pivotal in overcoming inventory management challenges. Tracking inventory accuracy involves comparing recorded stock levels with the actual physical inventory. Discrepancies can lead to errors in ordering, potentially causing stockouts or overstock situations. Consistently maintaining high inventory accuracy ensures precise decision-making, minimizing the risks of operational disruptions and customer dissatisfaction.

A company I previously worked for used several cold storage units in multiple locations to house perishable product. We constantly found ourselves running into sales issues like shorting shipments to national clients as well as having expiring cases and having to discount them or issue employee sales as not to report a complete loss. After doing some drilling down, we knew we had to start at "square 1" to resolve the issue and take a physical inventory to first ensure reporting accuracy. It revealed the cold storage company was not correctly reporting quantities which created a domino effect. We were also able to recoup some of the expenses since discrepancies were found and the responsibility fell on them.

Inventory accuracy: The principle behind is like a trash in and trash out. What comes in the warehouse should must come out less warehouse miss handlings that turn into breakages, pilferages and other warehouse factors. That is why a daily cycle counts should be conducted for an accurate inventory. Also for multiple SKUs at least 20% - 50% SKUs should be cycled count daily to minimize discrepancies on overall inventories and less disruptions of the operations.

Performing regularly scheduled audits or cycle counts helps tremendously with inventory accuracy, which will provide better visibility on true supply and demand. Checking in regularly is imperative.

To add everyone's contributions OTD - :On Time Delivery" metrics is key. Receiving Dock to Stock metrics as well as cycle counting can play key rolls in inventory management.

Adding some necessary key points: In my experiences, stockout rate causes are dynamic and usually not from the planning or forecasting but external and sometimes underestimated factors. On Time Delivery, Stock Relocation, Exchanges of Invoices with Vendors, New Price Adjustment are some factors causing spike of stockout cases. It is important for vendors to achieve On Time Delivery for their customers by assessing the transportation fleet and optimizing the delivery schedule.

Stockout rate measures the frequency or percentage of times a product is out of stock when a customer attempts to purchase it. Stockouts can lead to lost sales, decreased customer satisfaction, and damage to brand reputation. Monitoring stockout rates allows companies to identify trends, pinpoint root causes, and take corrective actions to prevent future occurrences. While minimizing stockouts is crucial, it's essential to strike a balance to avoid excess inventory. Analyze demand patterns, lead times, and supplier reliability to optimize inventory levels and reduce stockout risks. Implement inventory replenishment strategies such as safety stock, reorder points, and automatic reorder triggers to mitigate stockout occurrences.

A nightmare scenario for any business! Tracking your stockout rate helps you identify inventory gaps and prevent lost sales and customer frustration. Aim for a low stockout rate to maintain customer satisfaction and loyalty.

Inventory planning is also one of most crucial thing. We need to manage the space availability to fullfil it with right goods. Also checking for damage is also one of the very important aspects in tracking inventory

Fill rate measures the percentage of customer orders that are fulfilled completely from available inventory without backorders or delays. A high fill rate indicates efficient order fulfillment processes and high customer satisfaction, while a low fill rate may indicate inventory shortages, inaccuracies, or inefficiencies in the supply chain. Monitor fill rates across different products, customers, and order types to identify areas for improvement and prioritize resources accordingly. Strategies such as segmentation, demand forecasting, and safety stock buffers to improve fill rates and minimize order fulfillment delays. Continuously evaluate supplier performance & logistics processes to ensure timely delivery & availability of inventory.

Closely linked to stockouts, your fill rate measures the percentage of customer orders fulfilled without any missing items. A high fill rate reflects your ability to meet customer expectations and maintain a positive brand image.

Inventory Carrying Cost encompasses various expenses associated with holding and storing inventory, including storage space rental, insurance premiums, handling fees, and the risk of obsolescence. High carrying costs can significantly impact profitability, tying up capital that could be utilized elsewhere in the business. By efficiently managing inventory levels and turnover to minimize carrying costs while still meeting demand, businesses can improve their financial performance and overall operational efficiency. Regularly evaluating and optimizing inventory carrying costs is essential for maintaining a healthy bottom line and ensuring long-term sustainability in inventory management.

Capital management stems from effective inventory control guided by carrying cost analysis. By preventing unnecessary capital tie-up in excess inventory, businesses gain agility and responsiveness in dynamic markets. Carrying cost analysis is crucial for optimizing inventory levels. Maintaining an optimal balance prevents overstocking or stockouts, enhancing operational efficiency and streamlining the supply chain. It also serves as a compass for strategic decision-making, guiding policies, ordering quantities, and storage methods. Beyond financial implications, carrying cost directly impacts customer satisfaction. Maintaining optimal inventory levels prevents stockouts, ensuring timely order fulfillment and fostering brand loyalty..

Don't underestimate the impact of holding onto inventory! This metric includes storage fees, insurance, and potential spoilage costs. Tracking carrying costs helps you optimize inventory levels to avoid unnecessary expenses.

Inventory carrying costs are the expenses incurred by holding and storing inventory over a certain period. Understanding and effectively managing inventory carrying costs is essential for optimizing operational efficiency, maximizing profitability, and maintaining a competitive edge in today's dynamic market. Below listed components of inventory carrying costs and strategies to mitigate them. - Storage Costs - ?Obsolescence and Depreciation - ?Handling and Transportation Costs - ?Risk of Pilferage, Damage, and Shrinkage

Inventory carrying cost represents the expenses associated with holding and storing inventory, including storage facilities, insurance, depreciation, and obsolescence. It is essential for evaluating the financial impact of inventory management decisions and optimizing inventory levels to minimize carrying costs while maximizing profitability. While reducing inventory carrying costs is important, it's essential to balance cost savings with service levels and customer satisfaction. Analyze the trade-offs between inventory investment & potential sales revenue to determine optimal inventory levels.

One thing I found helpful while responsible for a Value Chain role was : Correlating market dynamics while inventory planning which has a direct impact of optimising working capital costs plus ensuring customer satisfaction for meeting on-time and in-full executions

- rate of replenishment of inventory - check for efficiency of vendor partners lead time vs actual delivery period - decentralising the risk of sourcing material from a single or selected vendor base. Focus on developing small scale vendors for items which impact less in your supply chain but contribute more in your inventory count - detailed analysis and categorisation of inventory based on consumption (VED Analysis) , criticality (ABC Analysis) - revisiting safety stock based on your consumption trend - deploying new age technologies to digitise inventory tracking

An aspect I didn’t see here goes up the supply chain to your vendors that you source from. What is their accuracy rate in terms of fulfilling your orders? What is their lead time, and do they provide it frequently enough/with enough volume to prevent stockouts? Do you have alternative vendors to source from?

Do your cycle counts from day one, literally! Separate your inventory team from your operations team. By maintaining and documenting regular and accurate cycle counts for ALL of your inventory, you'll be able to quickly spot the discrepancies and make corrections. Do a root cause, and follow up with process review/ coaching operationally; be accountable. The behavior needs to be corrected to mitigate the same issues in the future. Have a frequent, regular cadence for high value and high velocity products and everything else should have a documented count cycle, also. Don't wait for annual inventory to try and fix everything. You'll have a huge headache and end up writing too much off.

When struggling with inventory management, tracking key metrics is essential. Inventory turnover ratio, stockout rate, and inventory carrying cost help optimize inventory levels. Lead time, fill rate, and order cycle time ensure responsiveness to demand. Dead stock ratio minimizes obsolete inventory, while demand forecast accuracy aids in meeting customer needs. Supplier performance metrics ensure reliable supply chain operations. Tracking these metrics facilitates efficient inventory management for businesses.