18 Inventory Management Metrics Manufacturers Must Track
Built For
Inventory is one of the largest and most complex investments for manufacturers. It ties up working capital, impacts production schedules, and directly affects customer satisfaction. To manage inventory effectively, manufacturers must track and act on the right performance metrics.
By monitoring KPIs (Key Performance Indicators), manufacturers gain visibility into efficiency, costs, and opportunities to improve.
Here are 18 critical inventory management metrics every manufacturer should track and how software like Acctivate makes tracking them simple.
1. Inventory Turnover
Definition & Formula
Measures how many times inventory is sold and replenished during a given period.
- Inventory Turnover = COGS ÷ Average Inventory
Why It Matters
High turnover indicates efficient use of capital and minimal excess stock. Low turnover may reveal overproduction, slow-moving goods, or obsolete materials—problems that tie up resources and increase waste
2. Days in Inventory (DIO)
Definition & Formula
The average number of days an item stays in inventory before being sold.
- DIO = (Average Inventory ÷ COGS) × 365
Why It Matters
DIO highlights how quickly a manufacturer converts inventory into revenue. Long DIO means capital is locked up too long, while very short DIO may risk frequent shortages and production delays.
3. Inventory Holding (Carrying) Cost
Definition & Formula
The cost of storing and maintaining inventory, including warehousing, insurance, depreciation, and cost of capital.
- Holding Cost % = (Carrying Costs ÷ Average Inventory Value ) × 100
Why It Matters
Holding costs can represent up to 30% of inventory value per year. By reducing holding costs, manufacturers improve cash flow and free up resources for growth.
4. Fill Rate
Definition & Formula
Percentage of customer demand fulfilled directly from stock without delay.
- Fill Rate = (Orders Fulfilled ÷ Total Orders) × 100
Why It Matters
High fill rates ensure reliable deliveries and production continuity. Poor fill rates frustrate customers and force costly expedited sourcing.
5. Order Cycle Time
Definition & Formula
Time required from order placement to order delivery.
- Order Cycle Time = Delivery Date – Order Date
Why It Matters
Short cycle times give manufacturers a competitive advantage by responding quickly to demand. Long cycle times expose bottlenecks in fulfillment or production.
6. Inventory Accuracy
Definition & Formula
Measures how closely system records match physical inventory.
- Accuracy = (Counted Inventory ÷ System Inventory) × 100
Why It Matters
Accurate records are essential to avoid stockouts, overproduction, and costly rush orders. High accuracy keeps production running smoothly and reduces shrinkage.
7. Lead Time
Definition & Formula
The time between placing an order and receiving goods from a supplier.
- Lead Time = Receipt Date – Order Date
Why It Matters
Reliable, short lead times improve planning and reduce the need for high safety stock. Long or inconsistent lead times increase costs and production risk.
8. Economic Order Quantity (EOQ)
Definition & Formula
The optimal order size that minimizes both ordering and holding costs.
- EOQ = √(2 × Demand × Setup Cost ÷ Holding Cost)
Why It Matters
EOQ helps manufacturers avoid overstocking and understocking by aligning order sizes with cost efficiency.
9. Gross Margin Return on Investment (GMROI)
Definition & Formula
Measures profitability per dollar invested in inventory.
- GMROI = Gross Profit ÷ Average Inventory Cost
Why It Matters
GMROI highlights which products are worth investing in and which drain profitability. Manufacturers can prioritize high-margin items and reduce low-return stock.
10. Demand Forecast Accuracy
Definition & Formula
How closely projected demand matches actual demand.
- Forecast Accuracy = (1 – |Forecast – Actual| ÷ Actual) × 100
Why It Matters
Improved forecasting reduces costly overstocks, avoids backorders, and aligns manufacturing with true market demand.
11. Stockout Rate
Definition & Formula
Percentage of orders unfulfilled due to insufficient stock.
- Stockout Rate = (Unfulfilled Orders ÷ Total Orders) × 100)
Why It Matters
Stockouts stall production, delay deliveries, and damage customer trust. Monitoring this KPI prevents lost revenue.
12. Inventory Shrinkage
Definition & Formula
Percentage of inventory lost through theft, damage, spoilage, or errors.
- Shrinkage % = (Recorded Inventory – Actual Inventory) ÷ Recorded Inventory × 100
Why It Matters
Shrinkage eats into margins. Identifying shrinkage patterns helps manufacturers address security, handling, or process issues.
13. Perfect Order Rate (On-Time, In-Full)
Definition & Formula
Measures percentage of orders delivered accurately, on time, and in full.
- Perfect Order Rate = (Perfect Orders ÷ Total Orders) × 100
Why It Matters
Reflects operational excellence. High rates strengthen customer trust; low rates point to fulfillment inefficiencies.
14. Carrying Cost of Inventory
Definition & Formula
Annual holding costs expressed as a percentage of total inventory value.
Why It Matters
Quantifies the hidden cost of excess inventory. By lowering carrying costs, manufacturers release working capital for strategic growth.
15. Order Picking Accuracy
Definition & Formula
Percentage of orders picked correctly.
- Picking Accuracy = (Correct Picks ÷ Total Picks) × 100
Why It Matters
High accuracy reduces rework, returns, and fulfillment delays.
16. Backorder Rate
Definition & Formula
Percentage of orders delayed due to unavailable inventory.
- Backorder Rate = (Backorders ÷ Total Orders) × 100
Why It Matters
Chronic backorders frustrate customers and disrupt production schedules.
17. Cycle Count Accuracy
Definition & Formula
Percentage of cycle counts that match system records.
Why It Matters
Frequent, accurate cycle counts maintain reliable data without halting operations for full physical counts.
18. Cash Conversion Cycle (CCC)
Definition & Formula
The total time to convert inventory investments into cash.
- CCC = DIO + DSO – DPO
Why It Matters
A shorter CCC improves liquidity and financial resilience. Manufacturers that manage CCC well can reinvest faster and scale sustainably.
How Acctivate Software Makes Inventory Tracking Easy
Managing 18 KPIs manually is nearly impossible. That’s where Acctivate software empowers manufacturers with:
- Real-Time Dashboards to monitor turnover, GMROI, fill rate, and forecast accuracy.
- Automated Replenishment using EOQ, reorder points, and lead times.
- Operational Tracking for receiving, putaway, picking, and cycle counts.
- Cost Visibility to measure holding costs, shrinkage, and profitability.
- Forecasting & Planning Tools to align supply with actual demand.
Acctivate turns complex KPI tracking into actionable insight, helping manufacturers reduce costs, streamline processes, and improve service. Ready to take control of your inventory challenges? Watch an on-demand demo of Acctivate.
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