A higher value indicates stronger sales and a lower value indicates weaker sales. Inventory turnover is the frequency at which your inventory is being sold. Carrying costs can be calculated by dividing your total carrying costs by your average inventory costs.įormula: Total carrying costs / Overall inventory costs It represents how long your business can continue storing its inventory before you begin to lose money and need to find a new solution for slow-moving inventory and dead stock. It’s defined as excess inventory that is recorded in accounting but is no longer physically available, for reasons like theft, damage, or miscalculations.This KPI will show you the value of inventory that is missing from your warehouse due to those factors.įormula: (Cost of recorded inventory – Cost of physically present inventory) / Cost of recorded inventoryĬarrying cost of inventory is the total amount of money a business spends on owning, storing and holding inventory. Shrinkage is one kind of mismatch in your inventory accuracy. The closer the number is to 1, the more accurate your inventory tracking is.įormula: Inventory as tracked by system / Physically present inventory The inventory accuracy KPI will show if there is a difference between the two values, by dividing the stock tracked by the system by the stock physically remaining in the warehouse. This could be because of theft, damage, miscalculations, shortages on the supplier’s side, etc. Inventory tracking is typically done automatically using a warehouse management system or inventory management system, but this number doesn’t always match the quantity of inventory that is actually physically present in the warehouse. Inventory accuracy refers to the match between the amount of inventory that has been tracked and the amount that is physically present in a warehouse. Popular inventory KPIs include inventory accuracy, shrinkage, carrying cost of inventory, inventory turnover, and inventory to sales ratio. They are perfect when you’re looking for a way to monitor how your inventory is moving. Inventory KPIs are all about the stock of products that you have stored in your warehouse. So how do you find the KPIs you actually need? In this article, we will be discussing the following commonly used warehouse KPIs and what they can do for you: Instead, you can pick out just the ones that you find are most relevant to your current goals. But you may not need to use every KPI to reach your business goals. Most warehouse management KPIs can be applied to most warehouses, even though they all operate differently. Each warehouse KPI analyzes a specific process or operation and gives you a result that shows how well that process is doing by comparing it to past numbers and benchmarks. But one of the most popular methods is to develop warehouse management KPIs (Key Performance Indicators), which measure how effectively your processes are reaching their goals and objectives-sort of like a report card for your warehouse. There are several different ways to measure warehouse performance, like evaluating your business’ financial statements, conducting performance reviews, and using business metrics. Measurement is the step that ties all your other processes together and allows you to keep track of performance trends, gauge how efficiently you’re operating, uncover potential problems, manage risks, and much more. As a warehouse manager, you’re probably aware of how vital it is to measure your warehouse’s performance.
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