When entrepreneurs look to assess their inventory costs, a number of them assume those costs are relegated to the purchase price on parts and materials. Unfortunately, there are a number of other factors that should be considered with respect to the costs of inventory. To this extent, we’re discussing key performance indicators, or KPIs. So, what are the essential KPIs for inventory management?

Companies rely upon these performance indicators in order to assess and establish their total cost of ownership, and ultimately to enact strategies that reduce these costs. As such, KPIs for inventory management must be structured around providing entrepreneurs with a wider perspective of the costs to purchase and hold inventory over extended periods. KPIs provide companies with insight into how well their inventory is being managed, and how effective those aforementioned strategies are. Therefore, the question remains, what are the most common and essential inventory key performance indicators?