Must-Know Inventory Management Kpis [Latest Report]

Highlights: Inventory Management Kpis

  • 1. Inventory Turnover
  • 2. Days Sales of Inventory (DSI)
  • 4. Stock-to-sales Ratio
  • 5. Carrying Cost of Inventory
  • 6. Obsolete Inventory Percentage
  • 7. Order Lead Time
  • 8. Backorder Rate
  • 9. Sell-through Rate
  • 10. Stockouts
  • 11. Inventory Shrinkage

Table of Contents

In today’s highly competitive business landscape, effective inventory management is essential for the success and profitability of a company. Managing inventory efficiently requires not just having the right systems in place, but also tracking and analyzing key performance indicators (KPIs) to ensure that an organization’s inventory practices are yielding the best possible outcomes.

In this insightful blog post, we will explore the critical inventory management KPIs that every business owner or supply chain manager must pay close attention to. We will delve into the significance of each KPI, how to measure it, and how to use this information to optimize your inventory management processes, ultimately boosting your bottom line and enhancing customer satisfaction.

Inventory Management KPIs You Should Know

1. Inventory Turnover

Inventory turnover measures how often the inventory is sold and replaced within a specific time frame. A higher turnover rate indicates better performance in terms of efficiently managing and moving inventory.

2. Days Sales of Inventory (DSI)

DSI is the average number of days it takes for a company to sell the inventory it has on hand. A lower DSI indicates better inventory management, as it shows that the company can quickly convert inventory into sales.

In today’s fast-paced and increasingly competitive market, effective inventory management is crucial for businesses to thrive and maintain a strong foothold in the industry.

3. Gross Margin Return on Inventory Investment (GMROII)

GMROII is a ratio that demonstrates the profitability of the inventory. It’s calculated by dividing the gross margin by the average inventory value. A higher GMROII indicates the effectiveness of inventory investment, and that the company is earning a good profit on it.

4. Stock-to-sales Ratio

This ratio measures the proportion of inventory held by a company compared to its sales. A high stock-to-sales ratio may indicate overstocking or poor sales performance, whereas a lower ratio indicates efficient stock management.

5. Carrying Cost of Inventory

Carrying cost represents the total cost of holding and storing inventory. This includes costs such as storage fees, insurance costs, and spoilage. Efficient inventory management aims to minimize carrying costs to maximize profitability.

6. Obsolete Inventory Percentage

This KPI measures the proportion of inventory that has become outdated, damaged, or no longer in demand. A low percentage of obsolete inventory indicates that the company is effective in managing its inventory levels and minimizing waste.

7. Order Lead Time

Order lead time is the average amount of time it takes for a customer order to be processed and delivered. Shorter lead times lead to greater customer satisfaction and increased customer loyalty.

8. Backorder Rate

This KPI measures the percentage of orders that cannot be fulfilled due to lack of inventory. A lower backorder rate indicates that the company is successful in maintaining adequate inventory levels to satisfy customer demand.

9. Sell-through Rate

Sell-through rate is the proportion of products sold from a batch of inventory within a specific period. A high sell-through rate shows that the business has effectively managed stock levels and priced their products appropriately.

Stockouts refer to instances when the desired inventory is unavailable or sold out.

10. Stockouts

Stockouts refer to instances when the desired inventory is unavailable or sold out. The stockout rate can help identify inventory management problems and reduce the impact on sales and customer satisfaction.

11. Inventory Shrinkage

Inventory shrinkage refers to the loss of inventory due to theft, damage, or miscounting. A lower shrinkage rate indicates the effectiveness of the company’s loss prevention strategies and accurate inventory tracking.

Inventory Management KPIs Explained

Effective inventory management is crucial for businesses to optimize profitability and customer satisfaction. Key Performance Indicators (KPIs) such as Inventory Turnover, Days Sales of Inventory (DSI), and Gross Margin Return on Inventory Investment (GMROII) provide insights into how well a company is managing and maximizing its inventory efficiency, profitability, and investment. Stock-to-sales Ratio and Carrying Cost of Inventory help businesses balance stock levels, reduce costs, and improve sales performance.

Assessing Obsolete Inventory Percentage, Order Lead Time, and Backorder Rate ensures that a company is meeting customer demands with minimal waste and improved customer satisfaction. Monitoring Sell-through Rate, Stockouts, and Inventory Shrinkage helps businesses identify potential issues with pricing, stock levels, and loss prevention strategies, ultimately improving overall inventory management and reducing the impact on sales and customer satisfaction.


In summary, inventory management KPIs play a significant role in optimizing a company’s supply chain and ensuring that products are efficiently managed from warehouses to customers. A keen understanding of relevant KPIs such as inventory turnover, order accuracy, stockouts, days of supply, and carrying costs can help businesses make data-driven decisions that maximize returns while mitigating risks.

By consistently monitoring and analyzing these performance indicators, organizations can identify areas of improvement, streamline operations, and ultimately enhance overall customer satisfaction. In an ever-evolving marketplace, businesses that embrace inventory management KPIs will undoubtedly have a competitive edge, setting themselves up for long-term success.


What are Inventory Management KPIs, and why are they important?

Inventory Management KPIs (Key Performance Indicators) are measurable values that help businesses track the effectiveness and efficiency of their inventory management processes. They are crucial because they provide actionable insights, support decision-making, and help optimize inventory levels to reduce costs while meeting customer demand.

Which KPIs are essential for an effective inventory management system?

The essential KPIs for an effective inventory management system include Inventory Turnover, Inventory Accuracy, Order Lead Time, Stock-Out Rate, and Carrying Costs. Monitoring these KPIs can ensure that the business maintains optimal inventory levels, reducing excess stock and enhancing overall operational efficiency.

How is the inventory turnover rate calculated, and what does it indicate?

The Inventory Turnover Rate is calculated by dividing the Cost of Goods Sold (COGS) by the Average Inventory value. It indicates the frequency at which a company's inventory is sold and replaced within a specific time period. A high turnover rate signals efficient inventory management, while a low rate may imply excessive stock or slow-moving products.

What is the significance of measuring the stock-out rate?

Measuring the stock-out rate helps organizations understand the percentage of time that products are out of stock, which can negatively impact customer satisfaction, lead to lost sales, and damage a company's reputation. Monitoring the stock-out rate enables businesses to improve their inventory management and forecasting processes to minimize stock-outs and maintain an appropriate level of product availability.

How can carrying costs be reduced to improve overall inventory management?

Carrying costs can be reduced by implementing strategies like optimizing inventory levels, improving demand forecasting, implementing just-in-time inventory practices, utilizing warehouse management systems, and reducing the amount of obsolete or slow-moving stock. By reducing carrying costs, businesses can improve their overall inventory management efficiency, increase profitability, and better allocate resources.

How we write our statistic reports:

We have not conducted any studies ourselves. Our article provides a summary of all the statistics and studies available at the time of writing. We are solely presenting a summary, not expressing our own opinion. We have collected all statistics within our internal database. In some cases, we use Artificial Intelligence for formulating the statistics. The articles are updated regularly.

See our Editorial Process.

Table of Contents

... Before You Leave, Catch This! 🔥

Your next business insight is just a subscription away. Our newsletter The Week in Data delivers the freshest statistics and trends directly to you. Stay informed, stay ahead—subscribe now.

Sign up for our newsletter and become the navigator of tomorrow's trends. Equip your strategy with unparalleled insights!