Choosing the right metrics to measure your inventory can keep your business aligned to market demands and help it grow sustainably.
Inventory management, like all areas of a company, requires continued evaluation to ensure success. Perhaps more than any other department, inventory is uniquely positioned to affect almost every other part of your business.
Find opportunities for increased efficiency
Inventory management metrics can reveal certain inefficiencies that can be rectified quickly and cheaply:
- Long cycle time. Reduce the distance that pick and pack staff need to travel to fulfil an order.
- Average inventory level. Reduce or increase stock levels in anticipation of high or low demand periods.
- Inventory accuracy. Undertake regular stock takes to ensure that all other metrics are accurate.
Other metrics such as a long delivery time could indicate that a remote inventory dispatch location is wasting time and resources and increasing costs for you and your customers.
Understand the needs of your customers
Stock that sits in inventory for a long time could be an indicator of changing customer sentiment. A large amount of aging stock that needs to be marked down frequently will affect your gross margin percent.
Take advantage of this data by reorganising your warehouse so that the most popular products are closest to the packing station and items frequently ordered together are grouped.
Use technology to optimise inventory management
Warehouse management systems such as Cin7, Dear Systems or TradeGecko allow you to increase accuracy and gain real-time insights into your inventory management metrics. Having a dashboard of all your important information helps keep them top of mind.
Using APIs and integrations, your warehouse management system can connect to other systems within your business. Product counts in your eCommerce storefront will update in real-time and reduce ‘out of stock’ occurrences.
Connecting your warehouse management system to your fulfilment software will also reduce double-handling, allowing your team to get more done.
Increase the scalability of your business
Tightly controlled inventory can free up capital while also allowing you to respond to periods of high demand.
A low turnover rate means that stock is sitting on shelves and not making money. Measuring the cost of carry also allows you to account for storage and administration costs. Long picking, dispatch and fulfilment times can also be needlessly contributing to overhead costs.
Choose the inventory management metrics that you track based on the strategic objectives of your company to ensure you get the most out of them.
Ultimately, choosing and tracking the right inventory management metrics for your business will allow you to maximise your ability to fulfil customer orders quickly while minimising costs. Investing in this area will pay dividends as your company grows.
Craving even more insights? Read our report on the current state of play for omni-channel retail and shipping in Australia.