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Inventory reports are a base of knowledge and priceless insights into the e-commerce landscape. And yet, far too many small firms either fail to keep track of their inventories or do so manually. Both of these lead to losses in millions when you wind up with stock that is unfit to sell due to spoilage, expiry or other damages. Reporting analytical inventory accuracy can make or break an eCommerce company’s ability to stand out.
For a corporation to run profitably, inventory management is a crucial component. Inventory management and a company’s profitability have a favourable and significant link. A company’s improved control and transparency over its inventory management account for 36% of the rise in profit.
Without inventory management software, your business could lose time, money, or the entire operation. You will quickly lose track of your inventory levels which can lead to either excess Inventory or inventory shrinkage, both of which could further cause:
- Lost sales
- Loss of trust and goodwill
- More room to store the Inventory
- Costly implementation
- High storage expenses
- Spoilage of product
There are numerous examples of large corporations, such as JPMorgan Chase and Hershey’s, losing millions of dollars due to recurring stockouts, which goes back to poor inventory management. Their mishaps are a lesson learned for today’s eCommerce sellers.
When an inventory is out of stock on their chosen website for the first time,31% of online buyers will move to a rival. This increases to 50% after the second and 70% after the third. In the end, it all boils down to how well you understand the amount of Inventory you require and your current quantity and how efficiently you can locate it.
The stats above prove how crucial it is to effectively manage and track the stock within your plant and the whole supply chain. When it comes to boosting inventory visibility, you have a variety of solutions at your disposal, from slotting to implementation and everything in between. A reliable system can assist you in understanding these options.
Here we go with the list of top 10 inventory metrics that focus on the two most crucial aspects, i.e. cost factor and customer experience, as they both are crucial in inventory management for any modern firm trying to succeed in our cutthroat digital age.
What is an Inventory Report?
All businesses, regardless of size, are required to report on their finances, output, and sales, as well as other inventory-related information. Additionally, the ability to execute data-driven decisions based on reliable data is crucial for the expansion of an e-commerce company.
The amount of inventory that a company has on hand at any particular time is summarised in an inventory report. It allows businesses to take a close look at any potential problems with their inventory management systems. It assists in determining the likelihood of a shortage or surplus, classifies products to facilitate reorders, and frees up space being occupied by redundant resources.
Because carrying costs make up 20–30% of total inventory costs, it is imperative to maximise the resources that are kept on hand. The Inventory reports various major metrics are used to track performance and look for ways to improve operations that reflect Inventory that you may sell now, Inventory that you are purchasing, or Inventory that you require for internal company usage. This can help you save money and avoid running out of Inventory.
Types of inventory reports that can be generated on the EasyEcom platform:
Inventory stock status report
Stock Status Reports are used to provide details about Inventory that is currently in stock. It lists every item in stock and every item that is either overstocked or understocked. Furthermore, future purchase orders and sales orders might be shown. Additionally given are the quantity, minimum, and maximum of the stock.
Inventory Expiry Report
Expired Inventory is defined as any specific inventory that, as of the final inventory count date, has a “Use By”, “Expiration Date”, or any Specified Inventory that is defective, spoiled, or otherwise rendered outdated to the point of being unsellable.
Reserved Inventory Report
This report displays a breakdown of reserved units in your Inventory. Reserved inventory may be related to a customer order being delivered between fulfilment centres or may be set aside at a fulfilment centre for further processing.
Inventory Planning Reports
Based on how much merchandise you anticipate selling over a predetermined period, an inventory forecasting report’s goal is to determine the amount of Inventory required to fill upcoming customer requests. These projections consider your past sales data, anticipated promotions, and known external variables to create the most precise forecasts.
Inventory Aging Report
The Inventory aging report gives you important statistics on how frequently your Inventory moves. In essence, the listing of the inventory goods is arranged by how long they have been in stock. Using the aged inventory report is the simplest way to find slow-moving or obsolete Inventory that has to be reevaluated to accurately calculate your cost of goods sold.
Maintaining the proper Inventory is critical to the profitability of manufacturing, wholesale, and organisations. Proper inventory reporting offers businesses several benefits, including improved inventory planning, available inventory tracking, organised inventory classification, and the ability to issue purchase orders, all of which can be performed on the Easyecom Inventory Management System.
Metrics to look for in an Inventory Report
These variables can be used to assess performance and identify opportunities for improvement.
Average Inventory
Businesses analyse their average Inventory to determine how much stock is generally available throughout a certain period. It is typically determined by summing the inventory balances from the beginning and end of the accounting periods and then dividing the result by the number of the fiscal period.
Formula:
Average inventory = (Beginning inventory + Ending inventory) / Fiscal period
Inventory turnover
Inventory turnover, also known as inventory turnover ratio, is the frequency with which a company sells and replenishes its stock of items over a specific period. The cost of goods sold is considered in relation to the average Inventory over a year or specified period.
A low turnover rate suggests weak sales and surplus stocks, which can be troublesome for a firm. A high turnover rate typically implies that things are sold more quickly.
Formula:
Inventory Turnover = Cost of Goods Sold / Average Inventory
Order cycle time
Order cycle time is the average time it takes to ship an order from the moment it is placed, excluding shipping time. As a result, it is one of the most significant Metrics to monitor in your order fulfilment process because it allows you to assess the effectiveness of your operations.
Formula:
Order cycle time = (delivery date – order date) / total number of orders shipped
Gross Profit Margin
The gross profit margin helps to determine how much money a company gets from selling items once direct costs are deducted. It calculates the profit made on each item you sell. Most e-commerce companies run with a 20-40% gross margin. Depending on your product-specific pricing strategies, overall product mix, sales channels, product acquisition costs, and other considerations, this range might be wider.
Formula:
Gross Profit Margin= Net Sales − COGS / Net Sales
Order Fill Rate
Order fill rate refers to the percentage of orders shipped from available Inventory with no loss in sales, backorders, or stockouts. It’s an excellent indicator of both your capacity to satisfy consumer demand and the general efficiency of your e-commerce operations. It also allows you to forecast demand for specific SKUs in your Inventory and optimise your purchases appropriately.
Formula:
Order Fill Rate = (Total Orders Shipped / Total Orders Placed) x 100
Inventory write-off
Writing off Inventory entails subtracting the cost of no-value inventory items from the accounting books. When the market value of the Inventory drops to a point below the price at which it is now documented in the accounting books, it should be written off. The amount that needs to be written off should equal the discrepancy between the Inventory’s cost and the amount of money that can be made by selling it in the best possible way for the company.
Shrinkage
This refers to the discrepancy between the quantity of stock you have and the amount you have on paper. Inventory has reduced, but it’s not because of sales but due to multiple factors like supplier fraud and employee theft are some of the causes of shrinkage.
Formula:
Ending Inventory Value – Physically Counted Inventory Value
Cost per unit
The term “cost per unit” describes the variable and constant expenses incurred in manufacturing and distributing a single unit of any good to a final customer. You can find inefficiencies that are raising costs and lowering profit margins by analysing the cost per unit. Evaluating your cost of products sold provides context for setting prices and ensuring profit.
Formula:
Cost per unit = (Total fixed costs + Total variable costs) / Total units produced
Sell through rate
The sell-through rate compares the amount of Inventory sold at a particular time to the amount received in the same period. When contrasting one product or version with another or comparing a product’s sell-through of one month to the next. Low sell-through rates imply that you have overpriced or underbought, whereas high sell-through rates imply the opposite.
Formula:
Sell through rate = ( total sales / stock on hand ) x 100
Supplier Quality Index
The supplier quality index assesses, monitors, and manages a supplier’s performance. Your business strategy must be optimised, which requires measuring how effectively your suppliers operate. You’ll never know how much room for improvement if you don’t track your suppliers using specific data points. Tracking how often you have to return goods due to mistakes and abnormalities can indicate the supplier’s quality. It serves as valid grounds for choosing another supplier with a better track record and rating.
The takeaway
Looking at an inventory report for the first time can seem like an information overload. But as you familiarise yourself with the data it contains, you’ll find out if your firm is running at an optimal level or if there are red flags to address. With the right inventory management software, operations can be streamlined, inventory procedures can be simplified, and customer experiences can be enhanced.
Easyecom offers a variety of native inventory management and control features to assist in conquering some of the complex challenges. Forecast demand, manage reorders, track Inventory across several locations, and plan production and distribution. Your output, productivity, and profitability will surely increase if those concerns are resolved.
