Inventory analytics have become increasingly vital for consumer-centric brands. They help businesses operate more effectively, improve cash flow, and decrease stock-outs. Real-time data tracking has also been revolutionary for businesses as sales teams now have greater access to field data and insights that can help them better understand their business trends. Such analytics allow businesses to accurately estimate how many products they need to stock to maintain a 90% availability rate.
3 Vital Inventory Analytics Metrics to Track
Monitoring your stock is crucial to building a sustainable business and satisfying customers. There are several approaches to stock management, and the key performance indicators you wish to monitor and measure rely on your company's requirements and objectives. Some of the vital supply metrics include:
Backorder Rate
This metric results from orders placed without enough items in the store. This means that the customer will receive their purchased item later than expected, which can decrease customer satisfaction. We determine backorder rates using: the number of undeliverable orders/the total orders × 100. This rate will help indicate how to stock your orders based on demand.
Inventory Turnover Ratio
Businesses may make better judgments in several areas, such as pricing, production, marketing, buying, and warehouse management, by understanding their stock turnover ratio. The stock turnover ratio is derived as follows: cost of sales/ daily stock.
Stock Storage Costs
These are the expenses accrued from storing supplies in a warehouse. You can avoid overstocking your warehouse and wasting money on useless goods by monitoring your holding costs. How do you determine the holding costs? (Storage Costs + Employee Salaries + Opportunity Costs + Depreciation Costs) / Total Value of Annual Inventory).
How do Inventory Analytics help?
Supply management is among the many facets of business that have changed significantly due to data tracking and analysis improvements. Regular stock evaluations boost efficiency over time and assist in keeping your stock up to date. Here are the advantages of incorporating stock analytics into your business procedures.
They Ensure Healthy Stock Levels.
A successful DTC business requires careful stock analytics to ensure that you always have the right stock levels. Through predictive analytics, you get a picture of which days will bring the best sales leading up to peak periods. With such knowledge, DTC brands can optimize their supplies by maintaining adequate stock levels to satisfy consumer demand. Hence, preventing overstocking.
They Help Cut Back On Production Costs
Inventory analytics is an excellent approach to achieving lower costs. Ideally, supply costs are substantially high. Without efficient stock analysis techniques, your business is likely to experience losses. An inventory analysis can help you plan for safety stock by leveraging reports about your busiest and slowest periods. Businesses have been turning to predictive analytics to manage stock levels better and make purchase decisions.
They Help Make Accurate Inventory Decisions
As the business market constantly fluctuates, making restocking decisions can be daunting. However, through real-time analytics, DTC brands can learn a lot about their products. They can see which products will sell well and which will be slow-moving or, at worst, redundant. This also helps you decide when to replenish stock more effectively by looking at the current stock turnover ratio based on historical data. Having adequate supply at the right time is the key to satisfying and retaining customers.
They Helps Minimize Stock Waste
Reducing stock waste comes down to making accurate purchase decisions. If your focus is to grow your business, then you must account for all purchased goods. Fortunately, this is easy to do with real-time analytics. It helps you understand how quickly inventory is changing and how it is being utilized. The less waste, the higher the profit margins and, consequently, higher revenue.
Inventory Analytics Best Practices
There are several best practices for inventory analytics that would benefit DTC brands, as outlined below.
Use ABC Analysis to Categorize Your Data
Categorizing your data using the ABC analysis requires you to organize your stock based on importance.
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A is for the high-priority stock that contributes the most to your business revenue.
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B is for the medium-priority stock that falls between the best and the least-selling items.
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C is for the low-priority stock with low sales but vital to the overall revenue.
Consequently, the ABC analysis method makes tracking your sales easier. Hence, your business can adequately eliminate dead stock and enhance the stock turnover ratio.
Optimize Stock Turnover Rates
Stock turnover reveals how frequently a company purchases and replaces its stock over a certain period. By estimating your turnover rates, you can anticipate the consumer demand for your items, the quantity of dead stock you have, and the actions you need to take to sell additional goods.
Consolidate Your Data
Your company and operations team might benefit from centralizing your data in several ways. Housing your data in a single system allows for efficient communications between stakeholders, aiding in better decision-making. Consolidated data saves you time and money and helps you manage multichannel retail businesses.
Manage Your E-commerce Business With Luminous
Running your e-commerce business includes creating your online platform, managing customers, managing supplies, shipping, and fulfilling orders. Luminous has developed to be the comprehensive solution that any modern-day DTC company needs. It's completely integrated; this all-in-one platform helps you escape the agony of using several-point solutions to manage your business. Try it for free today and enjoy an all-in-one seamless platform to manage your e-commerce business.
