8 Important Inventory Metrics Every Parts Department Needs to Track

8 Important Inventory Metrics Every Parts Department Needs to Track

You need to track certain inventory metrics to properly assess your inventory, and to make any management changes. You need to track some metrics all the time. Other metrics will vary depending on your goals. You may also need to keep track of certain metrics in order for other departments to properly analyze them and provide reports for their teams.

Here are some metrics that you should be keeping an eye on to get you started.

Inventory Turnover

Inventory turnover is the number of times your SKUs have been sold and then replaced. This ratio can help you make the most informed decisions about ordering.

  • Inventory Turnover = COGS / Average Inventory Value
  • Average Inventory Value = (Beginning Inventory + Ending Inventory) / 2
  • Your inventory will move faster if the ratio is higher.

Days on Hand

  • Days on hand is another important metric. It tells you how long each item takes to sell or how many days it takes to store it.
  • The shorter the turnaround time, whether it’s days, weeks, or months, is the better. This allows for a quicker turnaround and reduces capital waste from inventory that doesn’t move.
  • Days on Hand = 365/Inventory Turnover
  • This formula can also be modified for weeks or months by changing 365 by 52 (for week) or 12 (12 (for month).

Sell-Through Rate

  • This will show your parts department how efficient your supply chain is internally.
  • Sell-Through Rate = (Units Sold/Units Received) x 100

Return on Investment (ROI).

  • The ROI is the return on investment for stock. The following is how it is calculated:
  • ROI = ((Profits – Cost Of Inventory) / Cost Of Inventory) x 100
  • Your gains will be greater if you have a higher percentage.

Cost Of Being Out Of Stock

  • This metric will tell you how much it will be to sell an item if it is out of stock.
  • Cost of being out of stock = Average units sold per day x profit per unit
  • You should consider keeping more stock of the item if the item has a higher value.

Excellent Order Rate

  • The Perfect Order Rate is a way to measure customer satisfaction. T is the percentage of orders that were delivered without any issues, such as damage or inaccuracies.
  • Perfect Order Rate = (% Orders delivered on time) x % Orders completed (x % Orders without damage) x x % Orders with proper records (x 100)
  • The better the final percentage is,

Inventory shrinkage

  • Inventory shrinkage refers to inventory that is not physically present but is still in your records. Poor record keeping, theft or evaporation are all possible causes.
  • Inventory shrinkage = Ending inventory – Value of physical inventory

Inventory carrying cost

  • It is expensive to keep items in inventory. Storage space, insurance, labor, and labor are all costs. Also, obsolescence must be considered.
  • Inventory Carrying costs = (Inventory Service Cost + Stock Risk Cost + Capital Cost + Storage Cost) / Total Inventory Value x 100

Additional Resource: