Top Inventory Management KPIs for Effective Supply Chain Optimization

Introduction

In today’s competitive business landscape, effective inventory management is vital for Supply Chain Optimization and profitability. Companies that track the right Inventory Management KPIs can reduce costs, balance inventory levels, and enhance customer satisfaction.

With the rise of automation and analytics, businesses now use data to improve stock visibility and accuracy. By understanding key metrics, organizations can make informed, real-time decisions that strengthen operations and customer experience.

This guide highlights essential Inventory Management KPIs for managing your supply chain and inventory processes effectively. It also explains how a mobile inventory management solution—like Propel Apps’ platform—can boost your KPIs and overall efficiency.

Key Inventory Management KPIs You Should Track

1. Inventory Turnover Ratio

Measures how often inventory is sold and replaced during a specific period.

‍Formula:

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

• A higher ratio = efficient inventory use.
• Example: COGS = $500,000; Average Inventory = $100,000 → Ratio = 5 (five turns per year).

2. Average Days to Sell Inventory (DSI)

Shows how many days it takes to sell the full stock.

‍Formula:

DSI = (Average Inventory / Cost of Goods Sold) × 365

• A lower DSI = faster turnover and reduced holding costs.
• Example: DSI = 73 days.

3. Sell-Through Rate

Indicates the percentage of inventory sold compared to what was received.

‍Formula:

Sell-Through Rate = (Units Sold / Units Received) × 100

• Example: 1,000 units received, 800 sold → 80% sell-through rate.

4. Stock-to-Sales Ratio

Compares available stock with actual sales.

‍Formula:

Stock-to-Sales Ratio = Average Inventory / Sales

• A lower ratio signals efficient inventory turnover.
• Example: $200,000 average inventory / $1M sales → 0.2 ratio.

5. Fill Rate

Measures how many customer orders are fulfilled completely on the first shipment.

‍Formula:

Fill Rate = (Number of Complete Orders / Total Orders) × 100

• Example: 950 out of 1,000 orders fulfilled → 95% fill rate.

6. Perfect Order Rate

Evaluates how many orders are error-free—on time, complete, and undamaged.

‍Formula:

Perfect Order Rate = (Number of Perfect Orders / Total Orders) × 100

• Example: 900 perfect orders out of 1,000 → 90% perfect order rate.

7. Lead Time

Tracks how long it takes from placing an order with a supplier to receiving it.

‍Formula:

Lead Time = Date Inventory Received – Date Order Placed

• Example: Average of 10 days → shorter lead time = better responsiveness.

8. Inventory Carrying Cost

Shows the total cost of storing unsold goods, including warehousing and depreciation.

‍Formula:

Carrying Cost = (Total Inventory Value × Carrying Cost %) / 100

• Example: $500,000 value × 20% → $100,000 annual carrying cost.
• Lowering this KPI helps maintain leaner inventory levels.

9. Backorder Rate

Measures how many orders can’t be filled immediately due to stockouts.

‍Formula:

Backorder Rate = (Backordered Items / Total Orders) × 100

• Example: 50 backorders out of 1,000 → 5% backorder rate.
• High rates indicate issues in inventory tracking software or demand forecasting.

10. Customer Satisfaction Score (CSAT)

Reflects customer happiness with product availability and delivery experience.

‍Formula:

CSAT = (Satisfied Customers / Total Customers) × 100

• Example: 450 satisfied out of 500 surveyed → 90% CSAT.
• Improving this KPI leads to better customer retention.

How a Mobile Inventory Management Solution Enhances KPIs

A mobile inventory management solution greatly improves accuracy, visibility, and real-time decision-making. It supports inventory cycle counting, barcode scanning, and RFID tracking—reducing manual errors and improving accuracy.

Key Benefits:

• Real-time stock updates for optimized inventory levels
• Fewer stockouts and overstock situations
• Faster picking, packing, and order fulfillment
• Lower carrying costs and improved asset utilization
• Centralized dashboards for data-driven insights

Propel Apps offers a cutting-edge mobile inventory management solution designed for Oracle EBS, Oracle SCM Cloud, and SAP S/4 HANA. It streamlines supply chain processes—picking, packing, and logistics—driving measurable KPI improvement and Supply Chain Optimization.

Final Thoughts

Tracking and improving Inventory Management KPIs helps businesses boost efficiency, reduce costs, and enhance customer satisfaction. Metrics like turnover ratio, lead time, and CSAT reveal valuable insights into performance gaps.

Every business has unique goals, so tailor your KPIs accordingly. Regularly review them to align with market shifts and customer needs. By combining KPI tracking with a reliable mobile inventory management solution, you’ll achieve smarter decision-making, optimized stock control, and stronger Supply Chain Optimization results.