Top 5 Inventory Metrics Essential for the Success of Small Businesses

The 5 Inventory Metrics You Should Use Daily:

 

Top Inventory Metrics Examples

Inventory Metrics


There are key inventory metrics that are required by small business owners and entrepreneurs to take their businesses to the next level. Although most business owners have the wherewithal needed to build a product and to reach their clients, however, the inventory metrics that will be discussed in this article need to be monitored by small business owners if they are interested in the success of their businesses. Highlighted below are the essential inventory metrics that every small business owner need to be conscious of.

 

Fill-in-the blank Excel KPI templates, dashboards, scorecards:

  • Inventory Turnover

The major inventory turnover entails the use of the cost of goods sold (i.e. what you paid for the material). Tracking this inventory metrics enables you to know how quickly your inventory is being replaced. As a small business owner, you need to avoid storing too much inventory in a warehouse. A business can utilize its inventory assets more effectively as the inventory turns get higher.

 

  • Item Fill Rate

Fill rate refers to the percentage of items ordered by a customer which your business could ship. This inventory metric calculates the service level between two different parties. The lower this metric, the poorer the performance of your inventory. You need to track the fill rate for each of your orders so that you can know the percentage of orders that go out completely filled as well as the percentage of items missing.

 

  • Inventory Levels and Accuracy

The size of a business determines the magnitude of pressure exerted on the inventory levels. For instance, the smaller the size of a business, the higher the pressure to keep the inventory levels on track. It is important to track inventory levels because it helps one to determine the amount of inventory that one needs to have on hand. It also helps to calculate seasonality as well as in understanding the key aspects of one’s processes. You need to track the inventory levels of items that generate your major sales.

 

  • Size of Gross Margin

Most small businesses do not pay attention to gross margin. In fact, most don’t understand it. The gross margin simply refers to the percentage of the ratio of the difference between a company’s total sales revenue and the cost of goods to the total sales revenue. It is important to track gross margins because they are crucial to the growth of a business. An increase in volume will improve the margin and for this to be achieved, effort and innovation are required.

 

  • Cycle Time

The cycle time commences when work begins on a particular request and ends when the item is to be delivered. In other words, it is the time required for an order that is first issued to be completed. It applies to different types of orders such as purchase orders, manufacture orders and consumer orders amongst others. The cycle time can be broken down into smaller cycles like the time required to process a purchase order to get an in-depth analysis.

 

Inventory Management Metrics

 

Conclusion

It is important to spend time analyzing and understanding the inventory metrics of your business to ensure its success. Instead of wasting time worrying about tracking your inventory accurately, you can embrace the use of inventory tracking technologies to help with managing, tracking as well as organizing your inventory assets.

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