Key Performance Indicators (KPI’s) are numbers used to measure, monitor and improve a business process. For beer wholesalers, improving inventory management leads to a big improvement in cash flows and profitability.
Below are three favorite inventory KPI’s:
- Inventory Days on Hand
- Inventory Out of Stocks
- Inventory Out of Code Beer
Inventory Days on Hand (DOH)
This KPI measures inventory efficiency. It answers the question of whether you have too much inventory, too little, or just the right amount.
The calculation works like this: Inventory Days on Hand = Inventory divided by Forecasted Sales
Inventory Out of Stocks (OOS)
Out of stocks are lost sales. They are painful. Reducing this number has an immediate impact on the sales of your business (as well as the cash flow and profitability).
The calculation works like this: Out of Stocks (lost sales $) divided by Total Sales $
Inventory Out of Code Beer (OOC)
We are seeing a lot of OOC these days due to the pandemic and shut down of on-premise business.
In normal times, out of code beer can be just as costly and damaging to your financial results. Measuring and improving out of code beer expense will have a direct impact on the margins and bottom line of your business.
The calculation works like this: Out of code beer cost ($) divided by Total sales ($)
Wrap Up + Action Items
Key Performance Indicators (KPI’s) are used to improve financial and operational results in your beer business. Share these Inventory KPI’s with your inventory manager or GM.
Use this Inventory Scorecard to measure and monitor your numbers. Set a goal and track actual results. Share the information with those who can make a difference and watch for improvement in cash flow and profitability.