11 Inventory Metrics you need to know for Successful Inventory Management

Inventory Management Metrics

A company that manages its inventory successfully would be on the road to profitability. Carrying the optimum inventory is what is needed if the movement of goods is to be successfully concluded. Sales and inventory should go hand in glove hence managing the appropriate inventory metrics are imperative.

Managing the right inventory metrics would assure success and to look at what they would really do we look at the following.

#1. Forecasting market share accurately

forecasting market share

It is imperative that the market of your product is forecasted accurately and whatever inventory that you would carry should be geared to meet the market requirements. You could be carrying excess inventory if your sales suffer due to errors in forecasting market demand for your product. Hence ensuring this inventory metric is met efficiently would be your prerogative.

#2. Improving levels in customer satisfaction


Customers are your bread and butter; therefore, every endeavour should be made to ensure that they are kept satisfied at all times. This will affect your inventory metric if customers shy away from your product. If customers hesitate to buy your product for whatever reason your inventory would rise.

#3. Performing order perfection

order perfection

Ordering anything should be carefully looked into with a microscopic eye. It is only when there is perfect inventory control that materials that come in would go out. Any item however trivial it maybe has a cost and many like it would add on to create a balloon effect. This inventory metric is important if you are to keep inventory at the optimum, which means that you carry only what you want, nothing more and nothing less.

#4. Effective fill rates as a percentage of orders

inventory fill rate

In a production facility, you must have the materials in hand to ensure on-time deliveries. The raw materials needed should be received, not early and not late. It should stay the minimum time at the facility for the production process to go ahead. Any item coming early is a cost incurred and anything coming late would delay production. That would cost on delivery times. Perfection is what is needed in this inventory metrics.

#5. Gross product contributions in margins through the different facilities

Gross product contributions

Every stage of the production process must be at optimum efficiency. If any stage is lethargic in performance, it would definitely affect the final time taken in the production process. Each unit should perform at optimum efficiency and keep the cost to the minimum. Meeting these inventory metrics would need everyone to put their hands up and work towards one goal.

#6. Maintain optimum time in the order cycle

optimum time in the order cycle

A customer’s order is what would run any company, and it should be taken very seriously by all. Once the order is given, there would be naturally a delivery date which would need to be met. To ensure that the delivery date is kept the order cycle should perform efficiently. It is not economically viable to stock the items required to produce the product before receiving the order. The order process should be kick-started with the customer’s request in hand. This would be the most effective system to ensure that the inventory metrics in managing the production facility moves smoothly.

#7. Accurate pick, pack, and ship

Pick Pack Ship

Once you complete the production process, the item which should reach the customer should not be delayed even by a minute. This is because every minute is precious, and the faster it gets to the customer, the sooner we could get to work on the next customer. This inventory metrics is important as everything depends on how soon the company could deliver the customer’s order.

#8. Turnover in inventory

turnover in inventory

The ideal situation would be to have no inventory at all but still produce the maximum products, but things don’t work like that, and we need to have some inventory. It is how soon you could get the items out that would matter most. Quick turnover in inventory is what would ensure high efficiency. Meeting these inventory metrics is what is most important because you require the optimum inventory. The higher inventory you carry would mean a loss on the financial side.

#9. Inventory costs

inventory costs

Every little item in your home or company has a cost behind it, and when they collect on the premises, it becomes a high burden of cost.therefor it requires to keep this at a bare minimum. The higher the inventory costs, the higher the exposure hence keeping it at the minimum would be the best option.

High inventories could cause umpteen number of issues out of which primarily the cost of maintaining them all. Reducing inventory which is one of the most important criteria, would bring down costs drastically. This inventory metrics have to be met if profitability is to be at optimum.

#10. Index on supplier quality

inventory supplier quality

All your suppliers should fall in perfect line with your production schedules because if one fails to meet his obligations, the whole exercise could fall apart. Hence they need to meet this inventory metrics come what may, and the production would need to go unhindered.

It is all systems go once the ball starts rolling on the production line. There would not be any comeback because there will be no delay in product delivery to the customer.

#11. Marketing and optimum sales


These are the two most important inventory metrics without which no company could move forward. For goods to move from any location, make a sale to the customer. It is only when a customer purchases that the impulse to move the product would be initiated. Complete the sale then, the product will move fast, and it will induce various activities all over the wide spectrum of the company to ensure that the delivery is made effectively.

If these two fail, then the company too would fail, but if the sales and marketing success the overall performance of the company would improve.

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