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What is Inventory Efficiency?

This is the ratio between current inventory and the Maximum Inventory Needed to satisfy the demand.

This ratio is measured in % and has to be lower than 100%.

What is the maximum inventory needed?

We can use the example of a piece delivered every day. After its receipt, the Maximum Inventory Needed in-house is the demand until the next delivery, the following day. If this piece is delivered every week, the Maximum Inventory Needed in-house is the demand of the next 7 days.

If you own the material during its transit from the supplier and you count it as in-transit inventory in your ERP, the maximum inventory has to be increased by the demand during the Information Transit-Time.

Inventory Efficiency Tool Excel spreadsheet to calculate Inventory Efficiency.

How to use Inventory Efficiency results? Standard analysis to highlight main levers of inventory reduction.

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