7 Inventory Management Metrics to track and improve business operations

Inventory Management Metrics

If companies don’t have the necessary tools to track product activity, inventory management & stock management can really indeed be a pain.

As firms’ supply chains grow, this process becomes much more difficult, as they must coordinate manufacturing, distribution, and retail. Inventory management gives firms crucial insights into product management, allowing them to cut costs and enhance operations.

Why should you keep track of your inventory management metrics?

Continuously tracking your stock control data and metrics allow you to notice patterns and obtain insights that can help you make better inventory decisions.

  • Inventory Management for Distressed Stock

It’s all too easy to let items slip through the cracks, but keeping track of distressed inventory is probably the most difficult difficulty most businesses and warehouses face.

Overstocking occurs when merchandise does not sell quickly enough, and you are left with mounds of distressed inventory to cope with.You can shift goods out before it hits the point of no return and you can’t sell it any longer if you keep track of how long you’ve owned it.If you can’t sell it, donate it if you can, and you’ll be able to deduct it off your business’s tax return at the very least.

  • Sales and operations planning should include inventory control

Although you’d assume that businesses would do this by now, a surprising percentage of them retain inventory management separate from their sales and operations planning.

By combining the two, you’ll have a better overall perspective of your business activities, which will give you greater inventory control.

  • Don’t be too swayed by the market

Many companies get caught up in new trends and purchase a large amount of fresh inventory to test out new things to sell.

Often, though, it will not pay off, and you will find up with an overstock of things that you are unable to sell.Rather than allowing market trends to govern you.

  • Sales that were lost

Chris Petersen of Integrated Marketing Solutions, a retail specialist, advised retailers to track missed sales when we first published this storey. The days an SKU is out of stock X the average or forecast sales rate can be used to estimate lost sales.

Lost sales projections, especially for top-selling SKUs, are an excellent “counterbalance” metric to see whether you’re trying to run too thin on inventory.

  • The percentage of sales that are completed

The percentage of units sold versus the number of units available for sale is known as sell-through.

To calculate metric measure, just use the formula below:

x 100 = Number of Units Sold / Starting Inventory

  • The cycle of cash to cash

The cash-to-cash cycle, also known as the cash conversion cycle, is the time between purchasing raw materials from suppliers and receiving cash from clients.

This statistic is commonly used to evaluate finance requirements and helps assess the amount of cash required to fund your day-to-day activitiesis the formula for calculating this measure.

  • Final Decision

Once you’ve determined which metrics are most relevant to your company, you can begin measuring them by generating benchmarks to see how your company is performing.Because every organization is unique, the benchmarks you discover online may not be the best ones to use when evaluating yours.It is up to you to determine which KPIs are necessary to achieve your objectives.

As your company expands, you may need to make changes to your reporting process to assist you to reach the next level.Finally, keeping track of inventory data and compiling reports takes time, which most firms do not have.

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