inventory managementProducts come in and out, but you should be in control of that cycle at all times. And if you run a small business or fulfillment company, you have to; your success depends on it.

If you’ve never given much thought to inventory metrics, here are 10 factors to take note of:

1. Gross Margin Size

A lot of business owners don’t like to talk about the math that goes into their organization, but they know they still have to know the numbers in order to understand profits, taxes, and the like. But the good news is you don’t have to know a lot of specific calculations, except for one—the gross margin, which is the total revenue minus the cost of your goods, divided by your total sales revenue, expressed as a percentage. This number helps to determine your efficiency level while lowering your costs.

2. Inventory Levels and Accuracy

Do you know how much of your product you have in stock right now? If you don’t, that’s a problem; there are few things worse than not having a product on hand when someone orders it or having ordered too much of an old product that’s not selling. Keeping tabs on your stock levels and making sure they are all stored well, haven’t expired, and are ready to be sent out are paramount concerns.

3. Item Fill Rate

Another mathematical aspect of a small business’ inventory metrics is the item fill rate, a percentage of items a customer ordered that your business was able to ship. To put it another way, you need to think about which orders are shipped and filled properly versus which had items missing. If your fill rate is low, then there’s something wrong; it means you’re not filling your items correctly and need to fix the issue immediately.

4. Inventory Turnover

Since “turnover” is a frequently thrown-around term, it’s beneficial to know exactly what inventory turnover means. Mathematically, it’s the cost of your products sold divided by the average inventory; practically, it’s about how quickly you replace your inventory as it’s sold. You ideally want a high rate of inventory turnover so that you keep old products moving out and revenue coming in.

5. Cycle Time

As the title suggests, product cycle time deals with making deadlines; it’s the time taken from when an order is placed to its delivery. This metric is dependent on what goods you’re dealing in, but should obviously be as short as possible to ensure people get their orders quickly and efficiently.

6. Order Status

A common inventory metric, the order status tells you where a package is, in the shipping process—it’ll tell you whether it’s shipped, on hold, or if it’s been cancelled. This is a great way to find out how efficient your delivery system is and to identify any bottlenecks. By identifying any common hold-ups, you’ll be able to decide whether you need to revamp your delivery system or make small, isolated changes to make the process as efficient as possible. Making a conscious effort to monitor and adjust this metric will help improve your overall order fulfillment time.

7. Back Order Rate

The back order rates refer to the number of orders that cannot be fulfilled once a customer places them. Reasons for back orders are often as simple as being out of stock of the requested item, or inaccuracies in your inventory. A high back order rate means that more customer will have to wait a longer period of time to receive their order, which will likely result in a decrease in customer satisfaction. The best practice to avoid this is to monitor this inventory metric closely so that you`ll be able to identify the reasons for the back order, such as seasonal demand, and be better prepared the next time around.

8. Perfect Order Rate

The perfect order rate tells you how many orders have been filled without incidents like damages, defects, or delay. It’s the goal of every business to maximize this metric and make as many orders as possible, perfect. It is necessary to monitor the perfect order rate of each category of item you ship so that you can identify which methods worked in your favor. By analyzing these efficiencies, you’ll be able to apply them to other areas and increase your overall perfect order rate.

9. Warehouse Efficiency

Warehouse efficiency is a great inventory metrics key performance indicator (KPI). When assessing the efficiency of your warehouse, you’ll be able to identify which areas are performing well and which ones should be revamped.

10. Customer Satisfaction

You may not think of customer satisfaction as a part of inventory metrics, but in reality, it should always be your number one priority—without satisfied customers, there would be no business to begin with. The more efficiently your warehouse runs and the faster your orders are fulfilled, the happier your customers will be. Metrics to consider when thinking about customer satisfaction include order status, item fill rate, and customer order cycle time.

The customer order cycle time is defined as the length of time it takes for customers to receive their package, after they’ve placed their order. When a customer receives their item on time or earlier than expected, they’ll be more satisfied than those who have to wait longer. It’s important to monitor this metric to make sure that you customers are as happy as they can be—and if they’re not, you’ll be able to figure out how you can fix that. You can figure out the customer order cycle time with a simple formula: delivery date minus the purchase order date.

To deal with all of these metrics, your best bet is to invest in quality inventory metrics software to make sure that you can keep tabs on your numbers and make the necessary improvements to them based on the results.

Need solutions to your product fulfillment problems? APS Fulfillment, Inc. has the knowledge and services to make your direct mail and product fulfillment ventures more successful. Contact APS Fulfillment, Inc. by e-mail at info@apsfulfillment.com, or phone toll-free at (954) 582-7450.