The Inventory Quality Ratio (IQR) is a fairly new metric. It measures the percentage of the inventory investment that is in active SKUs. Different companies define active different ways, but the most common definition is the investment in SKUs that have moved within the last 12 months. There really aren’t that many good benchmarks for this metric yet. It’s just a good measure of how well the inventory is being managed.
Suppose somebody said they had an inventory quality ratio of 0.5 – what would that tell you? It means 50% of the inventory investment is made in something that hasn’t moved in twelve month’s time.”