Top 21 Inventory KPIs and Metrics You Should Be Measuring This Year
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Inventory KPIs List

Inventory accuracy objectives or KPIs are measurable metrics that track the materials management team member, manager, and team’s ability to ensure inventory accuracy over time. Inventory accuracy forms an essential part of every successful manufacturing organization and is responsible for providing accurate record-keeping and inventory control as part of the manufacturing lifecycle.

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Inventory Accuracy Objectives for Materials Management Teams

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.
  • 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.

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  • 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 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.

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Inventory Accuracy Objectives for Materials Management Team Members

Inventory accuracy objectives or KPIs for materials management team members are designed to track and measure the materials management team members’ ability to work together as a team, ensuring inventory accuracy over time. Aspects like documenting daily shipments and deliveries to update inventory are core elements of this role.

  • 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.

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  • 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.
  • Document daily deliveries and shipments to update inventory – This KPI tracks and measures the extent to which the materials team member is able to document daily deliveries and shipments to update inventory. The higher this metric, the greater the team member’s ability to record daily deliveries and shipments.
  • Evaluate new inventory to ensure it’s ready for shipment – It is essential to evaluate new inventory to ensure it’s ready for shipment. This KPI tracks and measures the materials team member’s ability to assess new stock to make sure it is prepared for shipment: The higher the metric, the more successful the team member.
  • Order new supplies to avoid inefficiencies or excessive surplus – The raw materials’ levels must be carefully managed; too few supplies will slow down the manufacturing rate, and too many supplies will negatively affect cash flow. This KPI tracks and measures the materials team member’s ability to order new supplies on time to avoid inefficiencies or excessive surplus.

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Inventory Accuracy Objectives for Materials Management Managers

The inventory accuracy objectives or KPIs for materials management managers are designed to track and measure the materials management manager’s ability to manage the materials management team successfully, including accurate reporting on inventory levels, procuring raw materials from suppliers at the best prices, and implementing inventory tracking systems to manage inventory effectively.

  • Design and implement an inventory tracking system to optimize inventory control procedures – This KPI tracks and measures the extent to which the materials manager can design and implement an inventory tracking system to optimize inventory control procedures from an inventory accuracy point of view. The higher this metric, the greater the manager’s ability to design and implement an inventory tracking system.
  • Examine the levels of supplies and raw material to determine shortages – This KPI tracks and measures the extent to which the materials manager is able to examine the levels of supplies and raw material to determine shortages. The higher this metric, the greater the manager’s ability to explore the levels of supplies and raw materials to determine deficits.

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  • Prepare detailed reports on inventory operations, stock levels, and adjustments – This KPI tracks and measures the extent to which the materials manager is able to prepare detailed reports on inventory operations, stock levels, and adjustments. The higher this metric, the greater the manager’s ability to prepare detailed reports on inventory operations, stock levels, and adjustments.
  • Perform daily analysis to predict potential inventory problems – The ability to perform daily analysis to predict potential inventory problems plays a critical role in the effective management of materials. This KPI tracks and measures the extent to which the materials manager can analyze the inventory levels daily to ensure that potential problems are prevented.
  • Analyze different suppliers to obtain the best cost-effective deals – This KPI tracks and measures the materials manager’s ability to analyze different suppliers to obtain the best cost-effective deals. The higher this metric, the greater the extent to which the manager can analyze various suppliers to get the best cost-effective deals.
  • Recruit and train new employees – This KPI tracks and measures the materials manager’s ability to recruit and train new employees. The higher this metric, the greater the extent to which the manager is able to recruit and train new employees.
  • Ensure accurate product inventory for clients – Accurate product inventory levels must be consistently kept over time to ensure that the sales department has enough stock to sell. This KPI measures the material’s manager’s ability to ensure accurate product inventory for clients. The higher this metric, the greater the manager’s ability to guarantee correct inventory levels.
  • Report on inventory activities and variances – This KPI tracks and measures the extent to which the materials manager can report on inventory activities and variances over time. The higher this metric, the greater the manager’s ability to report on inventory activities and variances over time.
  • Develop and implement inventory control procedures and best practices  – This KPI tracks and measures the extent to which the materials manager develops and implements inventory control procedures and best practices. The higher this KPI, the greater the manager’s ability to develop and implement inventory control processes and best-practice methodologies.

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These inventory accuracy KPIs are an integral part of ensuring that the materials management team meets its core efficiencies. Inventory control or materials management plays an essential role in ensuring that the production line manufacturing process remains on point and improves continuously. As a result, measuring these objectives is key to organizational success. They focus on tracking metrics grouped as the inventory accuracy objectives for the materials management team member, team, and manager result areas.

It is necessary to track and measure these KPIs over time because they offer insight into the material management teams’ successes and where improvements are needed. Metrics like ensuring accurate inventory control levels consistently and continuously, designing and implementing inventory control systems, recording daily shipments and goods received, and ensuring precise reporting play a fundamental role in managing the inventory control process, driving the successful manufacturing process.

Using inventory accuracy objectives for the materials management team member, manager, and team aim to ensure consistency over time. High performing metrics are valued, translating into an effective inventory accuracy strategy and application by the materials management team. On the other hand, low performing metrics must be revisited to ensure a steady increase in performance over time.

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