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Important KPIs that can help sellers to reduce inventory costs

Retailers who understand what is inventory management, and how it really works, would agree that an efficient Inventory management keeps costs at check and significantly contributes to revenues.

However, to achieve that, you need evaluate specific parameters. Managing movements of stock for your supply chain business can be a nightmare unless you are tracking the right areas.

Running a selling business, you have to deal with stock processes right from the time you procure them from suppliers until shipped out to your customers.

This may sound easy to the ears, but, not keeping a tap on important metrics can lose you time, capital and effort behind managing your daily inventory tasks.

Are you tracking stock movements of your business? If yes, are you covering all those important metrics?

Not sure?

This blog will discuss on top inventory management KPIs that can help sellers perform effectively in all those areas that actually matters the most for a smooth inventory flow and optimization of costs, both.

Firstly, some major benefits of tracking your inventory KPIs

– Internal process improvements

Tracking important stock activities can help you analyze its performance and allow you experiment ways to enhance your daily stock management processes.

– Profit increase

KPIs will allow you data-driven insights, making it easy to take immediate measures and avoid misuse of resources when dealing with stock management activities for your selling business.

– Improved customer service

An exclusive benefit to any seller- gain insights on performance for each of your products to ensure you always have stock in hand, especially during holidays or rush days.

What can be that major KPI’S to make the best out of your inventory in 2016?

I- Product procurement cycle

As a seller, you’ll be regularly procuring products from your suppliers in order to fulfil your customer’s purchase orders.

Having a track on your procurement process will help you understand the turnaround of each of suppliers, instead of denying or making your customers wait for their orders due to no product availability.


Purchase management software can allow you invite all suppliers in one system, ensuring you can easily connect, as well as, analyze performance for each.

Doing so will automatically eliminate the risks of delay in fulfillment by allowing you to always connect with the correct supplier, especially when products are required the most.

II- Average age of products

Sellers, who deal with perishable goods, or, products having an expiration date, should avoid overstocking.

Blindly stocking products will use space and costs to preserve them in the warehouse; however, not receiving sales orders for long will automatically force you to destroy them.


Whether you are dealing with seasonal products or, products that expire- understanding the average demand for each can help you stock products that are sure to sell and replace with the new ones in a full-proof way.

Contact management software is allowing sellers to pull all customer’s order details at one place, making it easy to analyze the demand for each of products in real-time.

III- Pattern of product updates

If you do not update your product levels in time across all your stores, warehouses and marketplaces can create confusions and also lead to costly situations like overselling.

This will also hamper your daily inventory tasks, which in turn, can ruin your customer’s trust and liking for your brand.


Inventory management software can be a smart solution to track and automate product updates.

Allowing you to sync products from all your stores at one place, such software will help you automate updates for products across your channels in real-time.

This way, you can ensure correct stock levels and eliminate the risks of duplicate listings.

IV- Material usage

What many sellers overlook is the ability to keep a tap on those additional materials that are used to stock products safely in the warehouse.

You may consider such expenses to be nominal; however, at the end of the year, you won’t like to see yourself struggling to understand the exact calculation of revenue rates of your selling business.


Inventory management provider that allow customization services can help you create a solution to ensure your warehouse employees have an ability to updated material costs spent behind the safety for each product.

Understanding this expense can help you avoid unnecessary packaging mistakes and wastage of capital.

V- Alternative’s service level

Like many other sellers, you may have to rely on more than one supplier for procuring products to run your business. However, occasionally procuring products from certain suppliers may not guarantee the same level of service, as you get from your regular ones.

This way, it can automatically delay procurement of products, especially during those rush days when you need the most.


Instead of depending on one supplier most of the time, it’s suggested placing orders with  all your suppliers on multiple occasions will make it easy for you to analyze performance for each and ensure you get the same service level as offered to their regular customers.

Closing up

There are many other metrics and KPIs that relate to inventory management, such as stock turnover, and cost per order. However, considering the above-mentioned KPIs you can ensure to extract the most important inventory data that can help you simplify the tasks and improve performance, cash and profitability.


Savio Fernandes

Savio Fernandes

Savio Fernandes is a writer who influences. Writing for over three years at Orderhive, he is currently focused in offering eCommerce and retail solutions for start-ups and medium business owners.

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