GITNUX MARKETDATA REPORT 2023

Must-Know Inventory Accuracy Metrics

Last Updated: October 31, 2023

Written & Summarized by: Jannik Lindner

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Highlights: The Most Important Inventory Accuracy Metrics

1. Inventory Turnover Ratio
2. Days Sales of Inventory (DSI)
4. Stock-to-Sales Ratio
5. Sell-through Rate (%)
6. Average Age of Inventory
7. Order Fill Rate
8. Inventory Accuracy
9. Stockout Rate
10. Excess Inventory Ratio
11. Carrying Cost of Inventory
12. Shrinkage Rate

Inventory Accuracy Metrics: Our Guide

Keeping an accurate handle on your inventory is a critical aspect of managing a successful business, and recent studies have highlighted some key metrics that can make this task more manageable. This blog post explores these must-know inventory accuracy metrics that will enhance your understanding and control over your inventory. From cycle counting to stock discrepancy rates, we delve into the recent study’s revelations that will help optimize your inventory management.

Inventory Turnover Ratio

Shows how many times a company’s inventory is sold and replaced over a specific period. A higher turnover ratio indicates better inventory management.

Days Sales Of Inventory

Measures the number of days on average it takes a company to sell its inventory. Lower DSI indicates efficient inventory management and higher product demand.

GMROII

Indicates the profitability of a company’s inventory by comparing the gross margin of sales to average inventory cost. Higher GMROII values mean better inventory performance.

Stock-To-Sales Ratio

Compares inventory to projected sales. Lower ratio = efficient stock management; higher ratios may mean overstocking or potential sales loss.

Sell-Through Rate

Shows the percentage of sold inventory versus total stock. Higher percentage = efficient inventory management and demand- supply matching.

Average Age Of Inventory

Measures the time in days an item sits in inventory before being sold. A lower average age indicates faster-moving inventory and better management.

Order Fill Rate

Percentage of completed customer orders, considering out-of- stock items. Higher fill rate = improved customer service and inventory management.

Inventory Accuracy

Compares physical counts of inventory to system records to measure inventory tracking accuracy. A higher inventory accuracy percentage indicates better inventory management.

Stockout Rate

Measures stockout percentage from total inventory observations. Lower stockout rate = improved inventory planning.

Excess Inventory Ratio

Indicates the percentage of total inventory value considered excess (i.e. not needed for immediate sales). A lower excess inventory ratio signifies better inventory control.

Carrying Cost Of Inventory

Inventory holding costs: warehousing, insurance, taxes, etc. Lower costs = efficient inventory management.

Shrinkage Rate

Measures the percentage of inventory lost due to factors like theft, damage, or administrative errors. A lower shrinkage rate implies better inventory control and security measures.

Frequently Asked Questions

What are the key inventory accuracy metrics that help businesses manage their inventory effectively?

The key inventory accuracy metrics include cycle counting accuracy, stock accuracy percentage, inventory turnover ratio, gross margin return on investment (GMROI), and the order picking accuracy rate.

How can cycle counting accuracy contribute to better inventory management?

Cycle counting accuracy measures the percentage of discrepancies between recorded inventory data and actual physical inventory counts. By regularly monitoring cycle counting accuracy, businesses can quickly detect and fix data errors, optimizing their inventory levels and reducing the risk of stockouts or overstocking.

How is the stock accuracy percentage calculated, and why is it important?

Stock accuracy percentage can be calculated by dividing the accurate items (items with a correct recorded quantity) by the total items in inventory, then multiplying by 100. This metric is crucial for businesses because it provides a snapshot of how well their inventory records match the actual stock levels, which helps ensure efficient and streamlined supply chain operations.

What does the inventory turnover ratio indicate, and how can organizations improve it?

The inventory turnover ratio reflects how many times a company has sold and replaced its inventory during a specific time period. A higher turnover ratio implies efficient inventory management and strong product demand. Organizations can improve their inventory turnover ratio by using data-driven demand forecasting tools, improving supplier relationships, optimizing reorder points, and eliminating obsolete or slow-moving items from their inventory.

How can the order picking accuracy rate impact customer satisfaction, and what steps can businesses take to improve this metric?

The order picking accuracy rate measures the percentage of orders that were picked and packaged correctly. Higher accuracy directly contributes to customer satisfaction by minimizing errors and ensuring that customers receive the right products on time. Businesses can improve this metric by implementing better warehouse organization (e.g., through optimized product locations), employing barcode scanners, investing in staff training, and employing a robust warehouse management system to track errors and provide real-time monitoring.

How we write these articles

We have not conducted any studies ourselves. Our article provides a summary of all the statistics and studies available at the time of writing. We are solely presenting a summary, not expressing our own opinion. We have collected all statistics within our internal database. In some cases, we use Artificial Intelligence for formulating the statistics. The articles are updated regularly. See our Editorial Guidelines.

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