Inventory plays a key role in the growth of the retail business. There are many challenges that might arise in the long run like the price of the product increased; missed sales; and frustrated customers whose order can’t be fulfilled properly, etc. Through the key performance indicators (KPIs) you can able to monitor and supervise the inventory; businesses might get improve while buying as well as production processes, and business profitability. Moreover, KPIs allows companies of all size to calculate and put an impact on business operations.
To get a deep insight into the business, you need to go through the inventory management metrics. So, these all inventory management metrics and key performance indicators (KPIs) can get you an idea of how the business itself as well as suggest you the trend to follow for the betterment of the company.
In this blog, check out 5+ inventory management KPIs 2019 to follow up.
Inventory Management KPIs 2019
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Inventory Turnover
It is also known as Inventory days on hand. This KPI checks on the times’ inventory have been sold as well as got replaced at a particular time. Suppose, if the turnover is low then it clearly shows that the company has an excess stock or fewer sales. And the calculation is done in any of the two ways: Cost of goods sold / Average Inventory, Or, Sales / Inventory.
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Average Inventory
This KPI is used to calculate the amount of inventory the company has on-hand at the given time. The main goal is to keep away from the spikes or the unexpected drops in the inventory; as per the needs of the business maintain a constant flow of inventory in and out. In order to calculate, the average inventory for 1 month, you need to add onset inventory + closing inventory / 2.
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Holding price
This KPI calculates the amount used for storing the unsold inventory. It can also include the price of the damaged product; storage space amount; labor; and insurance. To lower the holding amount, try to put up a reorder point.
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Out of stock product
This KPI deals with the multiple times the demand can’t be fulfilled due to the absence of the inventory in the warehouse. It includes incurring lost sales, an opportunity missed, and unsatisfied customers. Moreover, it shows how a successful business depends entirely on the purchasing and production.
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Order cycle time
This KPI plays a key role in supply chain management as well as on the inventory control processes. It is often known as Order lead time. The formula for calculating the order cycle time, add the time taken for the supplier to deliver after the customer placed an order (delay) with the time needed to order again (reordering delay).
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Return rate
This KPI monitor and calculate the percentage of return orders as well as restocked products. It is important to track the reason behind the product to get returned so that you can work on the supply chain issues. And it might help you in stopping the costly returns of the products in the near future.
Conclusion
It is recommended to go for a convenient KPI for your business which might work for your business. Unicommerce is regarded as the high technology in-built software which has eased the e-commerce business operations effectively. It enables you to work in the cloud as well as provide ERP with your company’s software. Beginner or startup can try this software to get an in-detailed idea about the market.
