As you manage your inventory, you'll find that a number of key metrics can help you to understand what exactly is happening with your business and your inventory. These metrics can help you to help answer key questions:
In managing your inventory, some of the key metrics to track across your stock include:
What is Inventory Turnover Ratio?
The inventory turnover ratio measures how many times a company sells and replaces its inventory over a specific period, indicating the efficiency of inventory management and sales performance. For more information, see Inventory Turnover.
What is Sell Through Rate?
Sell-through rate is the percentage of inventory sold within a specific period, indicating how quickly products are moving off the shelves compared to the amount available for sale. For more information, see Sell Through Rate.
What is GMROI?
Gross Margin Return on Investment (GMROI) evaluates the profitability of your products by measuring the gross margin generated for every dollar invested in inventory. For more information, see GMROI.
What is contribution margin?
Contribution margin is the difference between sales revenue and variable costs, indicating how much money is available to cover fixed costs and generate profit. For more information, see Contribution Margin.
What is dead stock?
Dead stock refers to unsold inventory that remains in stock for an extended period and is unlikely to be sold in the future, leading to financial losses for a business. For more information, see Dead Stock.