Inventory management metrics

Inventory management metrics — sometimes referred to as “inventory performance” or “fulfillment efficiency” metrics — help business owners evaluate how their stock meets customer demand, adapts to market conditions and affects their bottom line.

The table below outlines the most important inventory management metrics of 2025. For each metric provided, our team has provided both the equation used to calculate the metric as well as an averaged benchmark derived from data collected in our industry-focused tables further below:

Inventory management metrics, 2025
Metric	Description	Equation	Benchmark averages
Stock turnover rate	The number of times a year stock needs to be replaced		3.2x
Days sales of inventory (DSI)	Length of time inventory sits in the warehouse before being picked for orders		85.5 days
Gross margin return on investment (GMROI)	Amount of profit per inventory dollar		2.03
Fill rate	The rate at which orders are fulfilled from stock		92.4%
Order accuracy rate	The rate at which the recipient receives the correct order		97.3%
Backorder rate	The percent of items with pending orders that are not in stock		2.12%
Carrying cost	The percent of your total inventory value that is being spent on holding costs		25.6%
Shrinkage rate	The percentage of inventory lost due to theft, damage, mismanagement, etc		1.8%
Dead stock %	The percent of total inventory that hasn’t sold in a certain amount of time		22.8%

The following sections detail each of these inventory management metrics in greater depth, including how each is calculated, industry-specific averages and methods to improve them.

Stock turnover ratio

Stock turnover ratio refers to the frequency with which a company has to replace stock that has been sold out, effectively measuring the number of times it is replaced in a year. This inventory management metric is sometimes measured quarterly in the event that a company is attempting to get a clearer picture of inventory flow. 

The formula to calculate stock turnover is as follows:

For example, a mid-size t-shirt printer with a cost of goods sold (COGS) at $300,000 and an average inventory value of $75,000 would have a stock turnover ratio of 4: 

While ratios are typically expressed with a colon (i.e., 4:1), inventory turnover rate is typically expressed as a single single number (e.g., 4x) in the world of logistics. This would mean a t-shirt provider with an inventory turnover ratio of 5 replaces their existing inventory five times a year on average. This number would then be compared against industry benchmarks to assess the company’s performance:

Improving stock turnover ratio

• Adjust your operational strategy: Utilize EOQ models and JIT methods to accommodate frequently sold products while optimizing your inventory forecasting software to navigate inventory management ahead of time.
• Adjust your product strategy: Reduce or eliminate SKUs with a low velocity. In some cases, a harsher SKU rationalization plan may be necessary to improve performance.
• Adopt new marketing tactics: Targeted promotions or loyalty programs can help move inventory more quickly and help you shorten lead times for future shipments.

Days sales of inventory (DSI)

Days sales of inventory measures how long in days an item sits in the warehouse before being sold. Generally, the lower the better since companies want products selling out as fast as possible,  but going too low may result in delays if the demand is actually too high. 

The formula for calculating DSI is as follows:

Notably, healthcare/medical device DSI tends to rise as the operation increases in size. This is primarily due to the need for preparedness in the event of large-scale emergencies, as larger hospitals and medical facilities typically handle the brunt of these events.

Companies seeking to improve their DSI should consider the following measures:

• Focus on turnover: Fast-selling products should be prioritized to quickly move them out of the warehouse as orders come in.
• Reduce or eliminate dead stock: Consider bulk sales, markdowns or bundling packages to move dead or underperforming stock out of the warehouse as fast as possible.

Gross margin return on investment (GMROI) 

Gross margin return on investment (GMROI) is the amount of profit per dollar invested in your inventory. This effectively gives business owners a clearer picture of how their inventory management is performing by cutting out expenses tied to your broader cost structure. 

The formula for GMROI is:

Careful readers will note that GMROI appears to flatten or even decrease.

• Prioritize higher margin products: Focusing on products that effectively earn more per product than those that don’t. Consider eliminating low-profit SKUs while promoting strong ones more aggressively.
• Leverage vendor negotiation: Discuss the possibility of volume discounts, bundled pricing or early payment incentives to lower your COGS, effectively raising your gross margin.
• Strategize your pricing: Offering premium versions of popular products will move them more quickly at a higher margin. Test these variants on inelastic products to reduce potential risk with higher prices.

Fill rate

Fill rate refers to the percentage of orders fulfilled without any delays or backorders. It directly corresponds to happy customers and fewer kinks in your inventory management system. 

The equation for fill rate is:

Businesses wanting to improve their fill rate should consider:

• Pad your safety stock: High-demand SKUs should have minimum stock levels set to automatically reorder well before the inventory hits 0 (best practices are to set fast alerts for fast-moving SKUs at 10-20% of forecasted demand)
• Improve demand forecasting: predictive analytics like the kind offered through a third-party logistics (3PL) platform will help assess the threats of seasonality and promotions to reduce the risk of understocking. 

Order accuracy rate

Order accuracy rate is a direct assessment of your picking, packing and shipping practices as well as inventory management. It measures the percentage of orders that were fulfilled correctly, meaning that the recipient received the right items and quantities at the correct destination within the correct time frame. 

The equation for order accuracy rate is:

Improving your order accuracy rate typically involves:

• Automating your picking, packing and processing: Implementing barcode scanning and RFID practices at your picking, packing and shipping allows warehouses to fulfill a greater number of orders more efficiently.
• Standardize your picking processes: Pick-to-light or voice-picking systems allow warehouse staff to fulfill orders more accurately with less work, improving travel time and order accuracy. 

Backorder rate

Backorder rate refers to the percentage of your orders which are unable to be fulfilled because the relevant SKU is out of stock. This particular inventory management metric can indicate problems with demand forecasting or lost sales. 

The formula for backorder rate is:

Backorder rate information is particularly hard to parse, as it is typically kept as an internal KPI and rarely mentioned in quarterly reports. Similarly, companies handle backorders differently, with B2C companies often just taking the hit while some B2B operations — notably, Caterpillar and Thermo Fisher Scientific — have made backorders a normal part of their regular order fulfillment process.

Backorder rates can be improved, however, by:

• Improved forecasting:  Adjust reorder points to prioritize consistently backordered SKUs. Similarly, adjust safety stock levels to reflect the charted fluctuations in demand.
• Automate your alerts: Have your inventory management system automatically reorder high-volume SKUs as they get below 20% to avoid potential surges in demand. 

Carrying Cost

Carrying cost of inventory is the percentage of your total inventory value that is eaten up by holding costs (e.g., insurance, depreciation, warehousing).  

The equation to calculate carrying cost of inventory is:

Calculating carrying costs is sometimes done differently, using total value of annual inventory rather than average inventory value. That formula looks like this:

Our experience is that focusing on average inventory value is more useful since it focuses on the value sitting in your warehouse (i.e., the value being carried) while excluding fast-moving inventory that isn’t really held, which can skew your numbers. 

Improving your carrying cost is best done through:

• Optimize your storage space: The more you can efficiently fit into the warehouse, the lower your carrying costs. Take advantage of vertical space to reduce wasted square footage with faster-moving items closer to your shipping areas.
• Minimize overstock: The longer SKUs sit in the warehouse, the higher your carrying cost. Consider shorter replenishment cycles and smaller orders to lower costs and reduce spoilage.
• Liquidate obsolete stock: Dead stock, in particular, is a liability, raising carrying costs and impeding layout efficiency. Consider mark-downs or bulk-sales to clear more space.

Shrinkage Rate

Shrinkage rate is an inventory management metric referring to the percentage of your stock that goes missing or has to be thrown out before it reaches fulfillment. This can be due to any number of reasons (e.g., theft, administrative error and warehouse temperature).

The formula for shrinkage rate is:

We should note that industries in which products expire need to pay special attention to the shrinkage rate of their facilities. Food providers, medical/pharmaceutical companies and cosmetic manufacturers all have a significantly higher risk of shrinkage by expiration.

Methods to improve shrinkage rate include:

• Install/improve surveillance systems: Cameras, keycard/biometric scanners and floodlighting systems discourage theft and can be used to track on-site administrative errors.
• Conduct spot checks: Implement cycle counting to continuously monitor inventory levels, prioritizing high-value/volume SKUs.

Dead Stock %

Dead stock is the percentage of your total inventory that has not sold in a given time period. This inventory management metric is malleable; it can be used to calculate annual, quarterly or even monthly churn to identify low-performing SKUs for potential markdowns. 

The formula for calculating dead stock is:

The percentage of dead stock can be deeply affected by industry, as shown in the table above. Cosmetics and healthcare supplements, for example, typically experience lower rates of dead stock due to expiration dates, subscription models and smaller packaging that keep stock rotating more regularly while reducing storage costs.

Improving your dead stock rate includes:

• Regular inventory reports: Have automated systems in place to flag SKUs after 30, 60 and 90 days of inactivity and use these reports as the basis for further investigation into the product.
• Leverage bundling options: Pairing a low-volume SKU with a high-volume SKU can help get dead stock out of the warehouse, effectively freeing up space for further operations. 

Improving your inventory management metrics

As this article might suggest, inventory management is a nuanced practice requiring intuitive tools for tracking and reporting to meet the needs of even the most experienced logistics expert. That’s why many business owners opt to work with a 3PL like Cart.com to handle the heavy lifting for them, navigating inventory management metrics with an experienced team and industry-leading tools. Speak with one of our experts to begin a discussion about what we can do for you.