Inventory Report- What Is It and How Often Do You Need One?
An inventory report plays a crucial role in monitoring a companys inventory health and performance. Learn about the many different kinds of reports, as well as how to produce one.
Every business must have a system in place for reporting information regarding their financial, sales, and marketing performance. The same principle also applies to a company's inventory. This is where inventory reports come in.
This document will assess the accuracy of inventory tracking procedures as well as the efficiency of replenishment strategies. When produced accurately, they can reveal valuable insight into consumer shopping trends and reveal growth opportunities.
What is an Inventory Report?
These reports summarize the details of a company's current stock of merchandise and include actionable inventory information such as-
- Which products are selling the fastest and slowest
- Which product categories are selling well
- Inventory losses due to wastage, theft, and improper handling
- Other pertinent details about the condition of inventory
- The order dates of products
- Expiry dates of perishable goods
- Vendor and supplier data of items
- SKUs (stock-keeping units) of individual products
Types of Inventory Reports
Inventory management is a process involving countless data points. Naturally, this means there are different types of reports that address different aspects of the inventory.
Overall inventory performance report
An overall inventory performance report typically provides a high-level view of a business's health. More specifically, it contains information about how profitable the company's products are and whether optimal sales volumes have been met.
Overall inventory performance reports will typically cover metrics such as-
- Inventory turnover - This measures how many times inventory items are replaced within a given timeframe. A higher turnover rate means that the company's merchandise is spending less time in the warehouse and store shelves. This, in turn, means their carrying costs are low.
- Item fill rate - This metric measures the ratio of customer orders met to total customer demand. A high fill rate means customers are getting their orders successfully. However, a fill rate of over 100% means the business could be back-ordering merchandise due to stockouts.
Knowing how much merchandise a business has in stock and how much is allocated to outgoing orders goes a long way towards keeping the supply chain efficient.
An inventory on-hand report, or stock control report, allows inventory managers to measure the disparity between available stock and allocated stock, preventing stockouts and reducing carrying costs.
This report will show information such as-
- Overall inventory levels
- Levels of products and product categories that need to be reordered
- Barcodes/SKUs of on-hand stock
Inventory valuation reports show the total and individual asset values of on-hand merchandise. These reports also break down the cost of acquiring, carrying, and transporting inventory, as well as the potential profits from their sale.
Inventory valuation reports typically contain the following metrics-
- Total inventory value - The sum of the cost of items held multiplied by their quantity.
- Total retail value - The sum of the price of items held multiplied by their quantity.
- Potential profit value - The difference between total retail and total inventory value
5 Steps for Creating an Inventory Report
Businesses can manually create a basic inventory report using spreadsheets. However, inventory management software can automate the following steps to produce detailed inventory reports in an instant.
1. List inventory items in a column
List down all merchandise at the SKU level (i.e. all variations for an item) in a column. Note that the more SKUs the company carries, the longer this process will take.
2. Create a separate column for each items description
Next, create another column and list down the descriptions of each item. Again, go down to the SKU level and be sure to note the details of each item to clearly differentiate them from one another.
3. Create a column for price
Assign a price to each item in another column. This allows the spreadsheet program to calculate the total value of your inventory based on price and quantity.
4. Place remaining stock in a column
Add the number of units for each inventory item in a separate column. Update this column to reflect new purchase orders and sales orders.
5. Choose a time period
Finally, decide how often the inventory report needs to be updated. Companies with high sales volumes will have to update this report more frequently due to the high level of inventory activity.
How Often Should a Business Produce an Inventory Report?
The answer to this question ultimately depends on your specific needs and goals. Some common options include-
- Weekly and monthly - Frequent reporting will help sales and marketing teams create plans for promotions to drive sales of slow products and generate interest in new merchandise.
- Seasonal - Seasonal reports allow businesses to compare year-over-year inventory data during busy selling seasons, such as the holiday season.
- Based on the nature of business - Reports can also be based on the specific industry a company engages in. Retail businesses, for example, need frequent inventory updates to maintain sufficient inventory levels at all times and ensure customer satisfaction.
In order to enhance the efficiency and accuracy of their inventory reporting, businesses should consider investing in inventory management software. These programs automatically capture inventory data from POS systems and produce accurate reports based on real-time inventory conditions whenever you need them.
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