Inventory management software for small businesses

10
Inventory
Metrics You
Need to Know
Right Now
THIS 2018

HOW’S YOUR
BUSINESS DOING?

As a busy wholesaler and distributor, in
between receiving purchases and fulfilling
orders, I’m sure you must wonder how
you’re business is doing

TOP TEN INVENTORY METRICS
Let’s start with the most critical one that
everyone talks about first when this
topic comes up

1
Inventory Turnover

Inventory turnover is the number of times inventory
is sold within a period of time, typically a year

Ideally, you want to increase your inventory
turnover and reduce your holding of
inventory for a couple of reasons
Firstly, increasing your
turnover means
reducing your holding
cost
Secondly, reducing your
holding cost means
increasing net income
and profitability
Finally, stocking items
that turnover quickly
means being responsive
to the market and
customer demand

2
Gross Margin
Percent

Gross Margin Percent = (Sales – The Cost of Sales) / Sales
Gross margin percent works hand in hand with
inventory turnover. If you have weak gross
margins, you might want to focus on increasing
your inventory turnover

3
Customer Order Fill
Rate

Customer Order Fill Rate = Orders that are Shipped in Full /
Total Number of Orders
The customer order fill rate shows how you are
servicing your customers. It shows what orders
your customers are getting on time

HOW CAN YOU IMPROVE THE
CUSTOMER EXPERIENCE?
Invest in a software solution that shows
you real-time inventory levels

4
Cost Of Carrying

Cost of Carrying = Carrying Costs / Overall Cost
The cost of carrying is the percentage that
represents the cents per dollar that is spent on
inventory overhead per year

5
Average Days To Sell
Inventory

Average Days To Sell Inventory = (Your Average
Inventory/The Cost of Goods Sold) x 365
The average days to sell inventory is how long
it takes a company to turn its inventory into
sales, that is, the average length of time that
your cash is tied up in inventory

6
Return On
Investment

Return On Investment = (Sales / Average Cost of
Inventory) x Gross Margin
This is also known as Gross Margin Return on
Investment (GMROI). It shows how much you are
earning for every dollar invested in your inventory

7
Item Fill Rate

Item Fill Rate = Received Quantity / Ordered Quantity
The item fill rate can be used to measure the order
fulfillment performance of a single delivery or for all
deliveries during a time period

8
Cycle Time

Cycle Time = Actual Ship Date – Customer Order Date
The item fill rate can be used to measure the order
fulfillment performance of a single delivery or for all
deliveries during a time period

9
Average Inventory
Level

Average Inventory Level = (Current Inventory + Previous
Inventory) / 2
The average inventory level is the mean value of
inventory throughout a certain time period

10
Inventory Accuracy

Inventory Accuracy = Regular Stock Takes
Inventory accuracy refers to how closely your
inventory records match your physical inventory

Most importantly, sophisticated inventory
management systems require high accuracies
of at least 95% to function well and generate
the ROI on your software investment

START BENCHMARKING
YOUR BUSINESS NOW
EmergeApp.net/Inventory-Reports/10-Inventory-
Metrics-For-SMBs/

Now it’s your turn to apply
them to your business
operations and gauge your
performance and
efficiency with stock
control