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KNOWLEDGE LIBRARY

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27Jun

Warehouse Occupancy Percentage

Optimal storage utilization helps enforce healthy inventory management. In our early work with Honda their...

02Jun

Efficient Procurement Inventory

Efficient procurement inventory (EPI) is often required to realize steep discounts when a special opportunity...

02Jun

Inventory Carrying Rate

The inventory carrying rate (ICR) is the percent of the unit inventory value used to...

26Jun

Inventory Activity Profiling & Data Mining

Suppose you were sick and went to the doctor for a diagnosis and prescription.  When...

27Jun

Inventory Performance Measures

Inventory performance measures include financial, productivity , quality, and response time indicators for evaluating the efficiency and...

Inventory Performance Measures

Inventory performance measures include financial, productivity , quality, and response time indicators for evaluating the efficiency and effectiveness of inventory management. The indicators include:

Financial Performance Indicators

  • Average Inventory Value ( AIV average inventory value (the average value of inventory on-hand) )
  • Inventory to Sales Ratio ( ISR inventory to sales ratio (the ratio of the average inventory value to the annual sales) )
  • Inventory Carrying Cost ( ICC (1) inventory carrying cost (2) International Chamber of Commerce (3) Interstate Commerce Commission )
  • Return on Inventory ( ROI return on investment OR return on inventory )
  • Total Inventory Cost ( TIC total inventory cost (the sum of inventory carrying costs and the administrative cost of managing inventory) )

Productivity the ratio of the output of a resource to the consumption of the resource Performance Indicators

  • Inventory Planner Productivity the ratio of the output of a resource to the consumption of the resource
  • Inventory Planner Effectiveness
  • Days on Hand (DOH days on-hand)
  • Leadtimes on Hand
  • Inventory Turnover (1) the number of times inventory turns each year, typically expressed as the ratio of annual sales at cost to average inventory value (2) (Sales divided by Average Inventory at Retail) OR (Cost of Goods Sold divided by Average Inventory at Cost) (3) financial ratio which measures velocity or how often (theoretically) entire inventory is sold and replaced within a given period of time (sometimes referred to as inventory turn rate, inventory turn ratio, or turns) (IT)

Quality Performance Indicators

  • Fill Rate The generic definition is the portion of customer demand satisfiable from on-hand stock. Fill rate can be monitored in different units of measure including unit fill rate (UFR), line fill rate (LFR), and order fill rate (OFR). Fill rate can also be measured in the context of time – initial fill rate (IFR), one-day fill rate (1DFR), two-day fill rate (2DFR)… secondary fill rate (SFR), and final fill rate (FFR).
  • Inventory Performance Index ( IPI inventory performance index (product of fill rate and inventory turn rate) )
  • Forecast Accuracy
  • Forecast Bias %
  • Warehouse Occupancy %
  • Inventory Accuracy (IA)
  • Inventory Quality Ratio ( IQR inventory quality ratio (the portion of inventory value invested in active items) )

Response Time Performance Indicators

  • Planning Cycle Time
  • Planning Cycle Time Variability
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