Inventory Metrics Examples

The success of any inventory management program depends on two things: reducing costs and meeting customer demand. Tracking the right inventory KPIs gives you the data needed to make informed decisions, cut waste and boost profitability.

Core Inventory Metrics Every Business Should Track

1. Inventory Turnover

Inventory turnover shows how quickly you sell the stock you hold. A high turnover means less money is tied up in inventory and lower holding costs.

Formula: Inventory Turnover = Cost of Goods Sold (COGS) ÷ Average Inventory Value

Calculate it for any period—monthly, quarterly or yearly—to spot trends. Below is a simple worksheet you can copy into Excel.

2. Inventory‑to‑Sales Ratio

This ratio measures the amount of capital locked in inventory relative to sales. It helps you judge whether you are over‑stocking or under‑stocking.

Formula: Inventory‑to‑Sales Ratio = Average Inventory Value ÷ Sales Revenue

Keep the ratio low (typically below 0.5) to ensure cash is flowing through the business.

3. Backorder Rate

Backorder rate captures the percentage of orders you could not fulfil immediately because the item was out of stock.

Formula: Backorder Rate = Number of Backordered Items ÷ Total Orders

A high backorder rate signals lost sales and can hurt customer loyalty.

Additional Inventory KPIs to Strengthen Your Dashboard

• Lost Sales: Revenue missed when customers leave because items are out of stock.
• Cycle Time: Total time from order receipt to product delivery.
• Item Fill Rate: Percentage of orders shipped in full on the first attempt.
• Inventory Accuracy: Results of periodic physical counts compared to system records.
• Out‑of‑Stock Items: Count of SKUs that were unavailable when customers shopped.
• Carrying Cost of Inventory: Total cost of owning inventory (storage, insurance, capital).

Industry‑Specific Examples

Retail

Retailers often focus on Item Fill Rate and Inventory Accuracy. A high fill rate (>95%) ensures shelves stay stocked, while accurate counts prevent costly recounts.

Manufacturing

Manufacturers prioritize Cycle Time and Backorder Rate. Reducing cycle time shortens lead‑times, and a low backorder rate (<2%) keeps production lines running smoothly.

E‑commerce

E‑commerce businesses watch Inventory‑to‑Sales Ratio closely to avoid excess inventory that ties up cash in a fast‑moving environment.

Quick Implementation Checklist

Boost Your Tracking with Ready‑Made Excel Tools

Save time and reduce errors by using pre‑built Excel templates. Our Financial Dashboard Excel template lets you visualize all core inventory metrics on a single screen.

For automated data refreshes, try the Automated Excel Reporting solution, which pulls data straight from your ERP or accounting software.

Start Measuring What Matters Today

Implement the three core metrics—Inventory Turnover, Inventory‑to‑Sales Ratio, and Backorder Rate—using the checklist above. Then expand your view with the additional KPIs and industry‑specific insights.

Ready to turn data into profit? Explore the Financial Dashboard Excel template and begin tracking your inventory performance now.