Materials Management KPIs List

Materials Management KPIs assist businesses to track and manage inventory in order to improve purchasing and production processes, cash flow cycle, and profitability.

Inventory Control

The inventory control office supervisor is in charge of proper storage and supervision of supplies in company retailing, warehousing, and storage properties.

Related: Materials Management Clerk, Supply Technician, Inventory Control Manager, Shelf Life Manager, Inventory Management Specialist.

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  • Materials Handling Damage – The percentage of the materials spoiled in the inventory handling and storage procedure out of COGS versus the total financial cost of inventory.
  • Warehouse Capacity Use Rate – The percentage of storage volume in a specific storage center that is actively being utilized versus the total storage volume in that area.
  • Equipment/Forklift Capacity Use Rate – The percentage of time during which machinery are utilized versus the total amount of time scheduled for use.
  • Honeycomb Percentage – The percentage of actual cube utilization versus the total storage house cube areas available.
  • Inventory Days of Supply – The number of days for which existent inventory will meet demand.
  • Inventory Count Accuracy – The correctness (by area and quantity) of the physical inventory versus the declared inventory.
  • Average Component/Material Shelf Life – The average amount of time (in days) that parts or materials are kept in the firm’s storage center before use in the manufacturing or production procedure.
  • Component Picking Cycle Time – The average of time (in hours) needed to collect materials and parts needed to start the manufacturing or production of an order.

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Inbound Logistics

The inbound logistics office supervisor is in charge of providing prompt and effective delivery of purchased materials.

Related: Logistics Analyst, Logistician, Receiving Specialist

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  • Percentage of Supplier Orders Received with Correct Documentation – The percentage of purchases received with the appropriate documentation given by suppliers versus the total number of purchases obtained from suppliers.
  • Percentage of Supplier Orders Received Damage Free – The percentage of purchase agreements obtained from suppliers that have no defects versus the total number of orders obtained from suppliers.
  • Dock-to-Stock Cycle Time – The total time (in hours) transpired from the arrival of merchandise from the supplier to when those merchandise are kept in the storage house and entered into the inventory control system.
  • Lines Received and Put Away per Hour – The average number of lines handled and stored per hour in the receiving department divided by the number of employees involved in that task.
  • On-Time Receipts from Supplier – The percentage of shipments accepted from a supplier on the date requested versus the total number of shipments received from suppliers.
  • Materials Order Cycle Time – The average amount of time (in days) transpired between the submission of an order from a supplier up to the time it arrives at its prearranged destination.
  • Component Tracking – A yes/no metric showing that one or more procedures (manual stocking, labeling, color coding) are employed to monitor material parts.
  • Data Storage – The duration for which the firm stores material data in the material monitoring system.
  • Supplier Orders Productivity – The average number of supplier purchase agreements handled every hour divided by the number of staff members handling orders.
  • Percentage of Component Parts Tracked – The percentage of material parts that the firm monitors in the system versus the total number of material parts utilized.

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Quality Control

The quality control office supervisor inspects raw materials and components received from suppliers for irregularities and deficiencies from specifications.

Related: Quality Control Inspector, Material Inspector, Quality Assurance Specialist.

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  • Order Picking Accuracy – The percentage of orders accurately prepared versus the total number of orders prepared.
  • Average Order Cycle Time – The average time (in days) transpired between the submission of the order by the client and receipt of the order by the client.
  • Acceptance Rate of In-Process Products – The percentage of in-process merchandise authorized by QM on the first inspection versus the total number of in-process merchandise.
  • Customer Requirement Review – A yes/no metric showing whether the merchandise is inspected against pre-set client specifications during the manufacturing process.
  • First Pass Yield (FPY) – The percentage of items that pass through the production procedure without any alteration or repairs for damages versus the total number of items created (also known as throughput yield (TPY).
  • Shipped Complete per Customer Order – The percentage of orders transported with all lines and units as specified by the client versus the total number of orders transported.
  • Reinspection – A yes/no metric showing whether the firm tries to repair and review non-compliant products during the last phase of manufacturing.
  • Percentage of Orders Requiring Rework – The percentage of orders that need more work after the first preparation and packaging procedure versus the total number of orders.
  • Internal Order Cycle Time – The average time (in days) transpired between submitting an order by the client and the supplier’s shipping of orders.
  • Acceptance Rate of Finished Goods – The percentage of all manufactured finished products certified by Quality Management staff on the initial inspection versus the total number of finished products.
  • On-Time Delivery Rate – The percentage of orders that arrive at their specified destination at the scheduled time versus the total number of orders transported.

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Inventory Accuracy Objectives

Inventory accuracy plays a vital role in the management of a company’s stock or inventory. Inventory accuracy KPIs measure and track stock levels’ accuracy, improving purchasing and production processes while increasing cash flow and profitability levels. Optimal inventory numbers lead to improved business operations.

  • Improve inventory turnover or days on hand – The inventory turnover or days on hand KPI measures how many times the company’s inventory has been sold and replaced in a given time. If this turnover figure is low, the company either has too much stock or too few sales.

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  • Improve the Average Days to Sell Inventory (DSI) – The Average Days to Sell Inventory (DSI) KPI measures the number of days it takes for the company to turn its inventory (or stock) into sales. This KPI differs between industries, depending on what the organization is selling. Large ticket items move slower than small ticket items or perishables.
  • Average inventory – The average inventory KPI is used to estimate the inventory your company has on hand during the predefined time. This metric is designed to avoid spikes or random drops in inventory and keep a relatively constant flow of stock in and out, based on the business’s needs.
  • Improve holding costs – The holding costs KPI measures the cost of storing unsold inventory, including the cost of damaged and spoiled goods, and the cost of storage space, labor, and insurance.
  • Improve stock-out – The stock-out KPI represents the number of times the stock demand cannot be met due to the absence of required stock. This can result in lost sales, missed opportunities, and frustrated clients. It provides an overview of the business’s purchasing and production efficiencies.
  • Improve service levels – The service level KPI is used to calculate the amount of stock needed to avoid a stock-out. The service level indicates a trade-off between the cost of inventory and the cost of a stock-out.
  • Improve lead time – The lead time KPI is an essential part of the supply chain management and inventory control process. To calculate lead time, take the sum of the time it takes a supplier to deliver after placing the order, plus the time it takes before the need to order again arises.
  • Improve the rate of return – The rate of return KPI tracks and rates the percentage of returned orders that need to be fulfilled a second time. It is vital to establish the reason for the returns to address problems in the supply chain process and identify key trends that will prevent future returns.
  • Improve inventory accuracy – The inventory accuracy KPI improves inventory management by requiring regular inventory headcounts to confirm that your internal stock levels are accurate.
  • Improve the perfect order rate  – The perfect order rate KPI measures the ratio of orders that are correctly ordered. This includes the correct delivery place, the correct product, the right package, the precise quantity, and the proper documentation. A high perfect order rate will lead to improved customer satisfaction levels.
  • Improve the order cycle time – The order cycle time KPI tracks and measures the time taken between an order placement date and the subsequent shipment date. This metric is a real indicator of how efficient the warehouse’s pick-pack-ship efficiencies are.
  • Improve order fulfillment accuracy – The order fulfillment accuracy KPI measures and tracks how accurately warehouse employees fulfill orders correctly the first time. The higher this metric, the more accurate the orders are, reducing the costs of replacing incorrect orders.

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Key Performance Indicators (KPIs) for the Inventory department are a vital means of ensuring materials department efficiencies and organizational success. If the organization has no stock to sell or raw materials with which to manufacture products, the organization will cease to exist. Thus, it is critical to measure key performance areas like inventory control and management, inbound logistics, and quality control.

Real-time tracking plays a vital role in managing these three areas. They can be broken down further into orders received metrics, and orders dispatched, order time cycle, component tracking, quality of raw materials acquired, and an acceptance rate of goods.

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