Inventory analysis: main KPIs

Inventory analysis is a logistics tool that makes it easier for a company to manage its stock and the appropriate level of supply of raw materials. Find out everything you need to know to apply it to your eCommerce inventory.

Inventory analysis objectives

There are a number of objectives of inventory analysis. Some of the most important are the following:

Identify areas for improvement, comparing current results with historical data, both for the company and the industry in general. In fact, there are certain benchmarks, which allow us to know if the processes are improving or, on the contrary, are susceptible to improvement.
Reduce inventory problems, which is one of the main issues to be avoided by all eCommerce companies. The goal is to minimize as much as possible stock inefficiencies and stock-outs that may occur in the daily activities of the company.
Improve the cash flow of the entire company, reducing the amount of money that is transformed into cash and increasing the transformation of inventory into profit.
Reduce stock wastage, especially inventory that is rendered unusable due to loss, theft or damage.
Improve negotiations with your suppliers. If you know which products produce the greatest benefit for your company, you will be better able to negotiate the terms of contracts with suppliers. You can also use external financing tools such as RITMO Invoice Financing to help you acquire and negotiate the best price for the items you have identified as the best sellers.

Inventory analysis methods

Depending on the business and the type of inventory your company carries, you can use different inventory analysis methods, such as:

ABC analysis consists of classifying the stock according to its value in several groups:
- Group A, for example, contains 80% of the inventory with the 20% highest value.
- Group B, the intermediate group, accounts for 30% of the inventory and holds 15% of the total value of the inventory.
- In Group C, the remaining inventory. In fact, it allows you to reorganize the stock according to the value of the products stored.

VED analysis is also based on the value of the inventory and its criticality within the stock. They are classified into:
- Vital, the inventory that should be in stock.
- Essentials, are less critical than the previous one, but also necessary, at least a minimum of it.
- Desirables, which is an optional stock, not critical but also important.

HML analysis, which measures the value of the inventory according to its cost. It is different from ABC as it only includes costs and not the selling price of those products. It is classified as follows:
- High cost, which groups together the most expensive items.
- Medium cost includes items with an intermediate cost.
- Low cost, which includes the lowest cost items.

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