Inventory is one of the most significant costs for many businesses so ensuring its optimization is often a key company objective. Luckily there are a variety of key performance indicators (KPI’s) that can be used to assess inventory performance, whether focusing on the economics or performance of stock. Below we are listing 5 commonly used KPI’s for you to understand it all :
 

1. Inventory Turn over
Inventory Turn tells you how many times inventory has been sold and replaced in a given period – calculated as Sales divided by average inventory value – whilst mileage may vary depending on the industry a low inventory turn can be indicative of holding too much stock (or stock of the wrong type).

2. Stockouts
Stockouts indicate where a demand cannot be met due to the absence of the required inventory – monitoring these will tell you if you have the right mix

of stock type and quantity.

3. Service Level
Service levels can be calculated per individual customer and is calculated by reviewing the number of times an item has been issued divided by the number of times it has been demanded – a low service level will indicate that customers invariably have to wait for parts and that inventory held could be of the wrong type.

4. Lead Time
Lead time is the length of time it takes to obtain inventory from suppliers – Long lead times can result in holding excess inventory (impacting cost and service level)

5. Stock Cover
Stock cover is the length of time that inventory will last if current usage continues – this is an important indicator as it helps appraise the impact of changes in lead time or the potential for running out of stock.