23 Must-Know KPIs For Successful Inventory Planning

They say knowledge is power – and that’s especially true when it comes to planning your inventory.

That’s why key performance indicators (KPIs) are so important.

KPIs are metrics that help you monitor and make informed decisions about your stock. They provide vital insights into turnover, sales, demand, costs, process efficiency, vendor relationships and more.

By mastering KPIs, you can anticipate demand, optimize stock levels and avoid costly missteps (like overstock and stockouts) which hamper cash flow.

In our upcoming Inventory Masterclass, How to Master Performance: KPIs for Optimal Inventory Health, a panel of retail experts will debate the most important KPIs of all (the ones which every retailer absolutely must be across).

It’s a free event and tickets are available now.

In the meantime, we’ve curated a longlist of important inventory-related KPIs you should be aware of if you want to successfully plan inventory for your e-commerce store.

1. Lost Sales Ratio. The lost sales ratio shows the percentage of potential sales a business loses due to stockouts. The formula for the lost sales ratio is: lost sales ratio = (number of lost sales x total sales) x 100. A high lost sales ratio indicates that a business may need to improve its inventory management processes.
2. Inventory Holding Cost. This metric summarizes all the costs of storing and protecting unsold products. The formula for inventory holding costs is: Inventory Holding Cost = (Storage Costs + Employee Salaries + Opportunity Costs + Depreciation Costs) / Total Value of Annual Inventory.
3. Fill Rate. Fill rate is a metric showing the percentage of customer orders fulfilled completely. The formula for fill rate is: fill rate = (Number of complete orders x total Number of orders) x 100. A high fill rate indicates that a business meets customer expectations and reduces the likelihood of returns.
4. Perfect Order Rate. A perfect order rate is a metric that shows the percentage of orders delivered without errors. The formula for perfect order rate is: Perfect Order Rate = (Number of perfect orders x total Number of orders) x 100. A high perfect order rate indicates that a business meets customer expectations and reduces the likelihood of returns.
5. Lead Time. This KPI measures the time it takes to receive inventory after placing an order. The formula for lead time is: Lead Time = (Date inventory received minus Date order placed) / Number of orders.
6. Inventory Shrinkage. This KPI measures inventory loss due to theft, damage, or other reasons. The formula for inventory shrinkage is: Inventory shrinkage = (cost of lost inventory / total inventory value) x 100.
7. Customer Satisfaction Score. This metric measures customers’ satisfaction level with the products and services provided by the business. The formula for customer satisfaction is: Customer Satisfaction Score = (Number of satisfied customers / Total number of customers) x 100.
8. Order Cycle. Order cycle measures the time it takes to fulfill an order from when it is placed to when it is delivered to the customer. The formula for an order cycle is: Order Cycle = (Date order delivered – Date order placed) / Number of orders.
9. Inventory Carrying Cost. This KPI measures the cost of holding inventory in stock. The formula for inventory carrying costs is: Inventory Carrying Cost = (Total inventory value x inventory carrying rate) / 365.
10. Stockouts. This KPI measures the number of times inventory is out of stock. The formula for stockouts is: Stockouts = (Number of stockouts / Total Number of orders) x 100.
11. Average Inventory. This KPI measures the average inventory held in stock over a period. The formula for average inventory is: Average Inventory = (beginning inventory plus ending inventory) / 2.
12. Internal Warehouse Management System (WMS) Efficiency. WMS efficiency measures how well the warehouse management system works. The formula for WMS efficiency is: WMS Efficiency = (Number of orders processed / Total time to process orders) x 100.
13. Available Inventory Accuracy. This KPI measures the accuracy of the available inventory data. The formula for available inventory accuracy is: Available Inventory Accuracy = (Actual inventory count/system inventory count) x 100.
14. Deadstock/spoilage. This KPI measures the amount of inventory that is not sold or has expired. The formula for dead stock or spoilage is: Dead Stock/Spoilage = (Value of Dead Stock/Spoilage / Total Inventory Value) x 100.
15. Inventory Carrying Costs. Carrying costs are associated with holding inventory, such as storage, insurance, and handling costs. The formula for carrying costs is: Inventory Carrying Costs = (average inventory value x carrying cost percentage) / 100. A lower carrying cost indicates that a business is managing its inventory effectively.
16. Gross Margin Return on Investment (GMROI). GMROI is a metric that shows how well a business turns inventory into profit. The formula for GMROI is Gross Margin Return on Investment = Gross Margin / Average Inventory Investment. The higher the GMROI, the better the business is performing.
17. Inventory Turnover Ratio. The inventory turnover ratio is a metric that shows how quickly a business is selling its inventory. The formula for inventory turnover ratio is: Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory. A high inventory turnover ratio indicates that a business is selling its inventory quickly.
18. Average Days to Sell Inventory (DSI). DSI is a metric that shows how many days, on average, it takes a company to sell an item. The formula for DSI is: DSI = (average inventory value in a year x cost of goods sold in the year) x 365. A lower DSI indicates a more efficient operation.
19. Sell-Through Ratio. The sell-through ratio is a metric that shows the percentage of inventory that is sold during a specific period. The formula for the sell-through ratio is: Sell-Through Ratio = Units Sold / Beginning Inventory. A high sell-through ratio indicates that a business is selling its inventory quickly.
20. Accuracy of Forecast Demand. Accuracy of forecast demand is a key performance indicator for supply chain management that shows how well a business is predicting the demand for its products. The formula for accuracy of forecast demand is: Accuracy of Forecast Demand = (actual demand minus forecast demand) / actual demand. A high accuracy of forecast demand indicates that a business is predicting demand accurately.
21. Rate of Return. The rate of return is a supply chain KPI that shows the percentage of inventory that is returned by customers. The formula for rate of return is: Rate of Return = (number of units returned x total Number of units sold) x 100. A high rate of return indicates that a business may have quality control issues or is not meeting customer expectations.
22. Days/Weeks on Hand. This metric measures how quickly a business sells through its average inventory on hand. The formula for Days/Weeks on Hand is: Days/Weeks on Hand = (Average Inventory Value / Cost of Goods Sold) x 7 or 365. A lower number of days or weeks on hand indicates that a business is selling its inventory quickly.
23. Stock-to-Sales Ratio. This metric shows the relationship between inventory levels and sales. The formula for the stock-to-sales ratio is: Stock-to-Sales ratio = average inventory value divided by average sales per day. A lower stock-to-sales ratio indicates that a business is managing its inventory effectively.

Want to know which KPIs are most important of all?

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