Metrics. KPIs. All businesses know they’re important, but not all businesses are tracking them. It’s firmly established that knowledge is power, so why do so many inventory businesses fail to build the data they require to make smarter inventory decisions?
Tracking the right inventory metrics can be the difference between an inventory business running successfully, and one that doesn’t. It’s important that your business finds the metrics which are worth tracking and begins measuring them consistently.
To get you on the right track, we’re looking at 7 inventory metrics it’s crucial to track.
- Receipt accuracy
Receiving correctness refers to the accuracy of the stock you collect from purchase orders. It’s important to measure this metric so you know which suppliers are delivering the correct stock, and which regularly make mistakes you can’t afford.
- Cost of holding inventory
Holding inventory isn’t free. In fact, it can get expensive quickly. Having oversight of the costs of carrying inventory is important for managing your warehouse. This metric doesn’t just look at the cost of your warehouse space, but all costs involved in holding your stock. This includes security costs, and any costs of damage.
- Inventory turnover
It’s important to know which of your inventory is actually selling, so measuring inventory turnover by looking at how often stock is sold over a period of time gives you more control. Keeping an eye on this metric gives you the information you need to manage inventory better, and perhaps reducing order quantities of items with a low inventory turnover.
- Order lead time
Order lead time looks at how long each order takes to reach its customer. This is a crucial metric which means a lot for your business performance. Long lead times can result in unhappy and eventually, disengaged customers, especially if shorter lead times were promised. Having oversight of your lead times is the first step to managing and reducing them.
- Correct order rate
Similarly to lead times, this metric means a lot to your customers. Correct order rate refers to how many of the orders that arrive with customers are correct. It’s important that this metric is as high as possible since incorrect orders equal unhappy customers.
- Order picking accuracy
Picking correctness goes hand in hand with correct order rate, as incorrect picking is usually the cause of incorrect orders. This metric refers to how many items picked are correct with the order placed. Measuring this metric can give you a better indication of where incorrect orders are stemming from.
- Rate of returns
Rate of returns looks at how many items are returned after delivery to the customer. A great indication of what your business is doing well from an inventory perspective, it’s important to categorise this metric into different reasons for the returns, so you can properly establish the cause of a problem.
Looking to get in control of your warehouse and inventory? Find out more about what Workhorse does for you.