Running a brand on vibes can work if you go viral, but gets expensive quick. The best in class retailers use inventory metrics to ensure the right products are in stock at the right time.
Sales Velocity - how quickly you sell
- ✓ Track how quickly products sell
- ✓ Prioritize fast-moving items
- ✓ Adjust stock levels based on real-time demand
Sales velocity helps understand which products sell the fastest. High-velocity items should always be in stock to prevent lost sales, while slower-moving products can be ordered in smaller quantities to free up capital.
If a product is selling slower than expected, adjusting marketing efforts or bundling it with a high-velocity item can boost movement.
Lead Time - how fast you restock
- ✓ Track actuals vs expected
- ✓ Test in small batches
- ✓ Optimize reorder timing
Long supplier lead times or unreliable deliveries often cause stockouts, lost revenue and missed cashflow. Shorter lead times are ideal – they let you reorder closer to the point of need, reducing the inventory you must keep on hand. However, real lead times can be unpredictable, with actual delivery dates often varying from promised dates due to supply chain disruptions, supplier operations, or shipping delays. This is why it is crucial to track historical lead times from purchase order to delivery, and build in buffer time to account for potential delays.
Inventory Turnover - how often you restock
- ✓ See how often inventory is sold and replaced
- ✓ Improve cash flow by reducing excess stock
- ✓ Avoid revenue stagnation
Inventory turnover is the pulse on how fast you are selling and replacing your stock. A high inventory turnover usually means you're selling products quickly, which is great if you're profitable and restocking efficiently. But if your turnover is high because you're underpricing, running out of stock too often, or struggling with supply chain delays, it could hurt your business.
A business can have fast restocking (short lead time) but still restock infrequently (low inventory turnover) if demand is low. Conversely, a business might restock frequently (high turnover) even with slow restocking (long lead time) by carefully planning ahead.