Inventory reporting is the pits, right? The pits, as in, no one has ever said “I wish my inventory reporting wasn’t over for this month!”
Or “I really fought to keep inventory reporting in my role – I love that part.”
And especially not “What I really like is when the boss asks for whole new inventory metrics at short notice…”.
What we’re getting at here is that inventory reporting – digging into the details of how your business makes, manages and moves its stock and products – is a necessary evil.
But necessary nonetheless.
So necessary, in fact, that we’re going to interrupt this useful blog post about how to do inventory reporting in real time with no effort, just to hammer home the point: if you’re not already tracking and reporting your core inventory KPIs, then you really, really need to start.
(Or you can just jump to the part where we give you the solution)
Not reporting on inventory? Start now
Taking a step back for a moment: what is inventory reporting?
Basically it’s the regular tracking of stock-related KPIs, which are then shared more widely within the company – especially with management – to manage risk and inform strategy.
Why is this important?
For product businesses, inventory costs can be significant. Having excessively high stock levels means:
- More operating capital tied up in inventory
- Greater exposure to risks such as theft, fire, or the expiry of perishable goods
- Higher insurance costs
- Greater warehouse and staffing costs
- More exposure to product lifecycle trends
At the other end of the scale holding too little stock increases your risk of:
- Stock-outs halting production
- Customer dissatisfaction from late fulfilment
- Running an unproductive business (too few outputs relative to your staff hours)
Clearly, inventory represents a risk that must be managed – and this starts with accurate inventory reporting (whether you enjoy it or not).
Basic inventory metrics you should track
You can read a fuller description of different types of inventory reports here, but for the purposes of this blog, these are a few of the core metrics you should be tracking if your product business holds inventory.
Stock on Hand Value (SOH)
As an absolute basic you need to know the total dollar value of the stock you hold in your business. There’s no need to be a slouch about this though – you should also know your SOH value by warehouse, and be able to track your SOH value by product category and even SKU (Stock Keeping Unit – aka individual product). Knowing how much capital you have tied up in inventory – and tracking fluctuations over time – is an important part of your financial risk management, as well as a broad-brush measure of the leanness of your operation.
Cost of Goods Sold (COGS)
Basically your COGS shows how much it costs you to make (or import) products. And don’t be put off by the word ‘sold’ in there – in inventory reporting your products have a COGS figure even before they’re sent to market. Infact, if you’re not aware of your COGS prior to selling your products you risk parting with them at a loss.
Why? Let’s imagine you run a jam making business. As the season for each type of fruit runs its course the price changes dramatically as supply varies – which means you need to carefully monitor changes in your COGS by individual product in order to set the right price.
And the price of raw ingredients isn’t the only thing that varies. Say a truck drivers’ strike forces you to deliver your products by more costly couriers. With a granular view of your COGS – and by extension your Gross Profit Margin by SKU – you’re able to calculate which products you can still profitably deliver and sell, and which you should pull from shelves for a while.
Average Days to Sell
Average Days To Sell is another core metric to track. Many managers have KPIs set around this figure – which is why so many warehouse managers have the dreary task of reporting this figure on the regular.
A classic target for a manager might be having an Average Days To Sell limit of 90 days. Holding certain kinds of stock for too long – say, perishables, or toys or clothing items that can quickly go out of style – risks them never being sold and getting written off. So managers with average days to sell targets will know to push marketing efforts, change pricing, or bundle older products with new items to keep this figure down.
If perishable products form any part of your inventory then Average Days to Sell will be a familiar metric.
But don’t calculate these metrics yourself!
Thankfully the days of calculating these figures yourself by pulling reports, or – have mercy – conducting a stocktake and working it out manually, are now over.
With a real-time inventory management system these core metrics are available 24-7 to all users. And in Unleashed’s Business Intelligence Vision module they can be interrogated at any level and cross referenced with all other metrics to create the unique KPIs you care about.
Want to know Gross Profit Margin by Sales Person by Region? Find it in three clicks.
Want your Average Days to Sell figure broken down by SKU or Warehouse? That data is at your fingertips.
With the powerful insights available within Unleashed Business Intelligence you and your team will never need to set time aside for Inventory Reporting again. And that’s a very good thing.
Why we think you should try Unleashed Business Intelligence Vision for free
The basic Business Intelligence module in Unleashed – called BI Foundation – is permanently free for all users. If you’re a current user you’ll already notice that your dashboard has been updated with Unleashed’s core metrics. However we strongly encourage you to test the more sophisticated BI Vision module in a free trial.
BI Vision has been designed to give Unleashed users the kind of powerful analytics insights normally accessible only by those with Enterprise level solutions like Microsoft Power BI or SAS, which can cost in excess of $100,000 per year in licensing fees, and require a full manual data integration.
Unleashed BI Vision, by contrast, is incredibly competitively priced, and uses the live business data already managed by Unleashed’s inventory, sales and production systems.
Article by Greg Roughan in collaboration with our team of inventory management and business specialists. Greg has been writing, publishing and working with content for more than 20 years. His writing motto is ‘don’t be boring’. His outdoors motto is ”I wish I hadn’t brought my headtorch’, said nobody, ever’. He lives in Auckland, New Zealand, with his family.