What Is OTIF? On Time In Full Explained (Formula & Example)
OTIF stands for On Time In Full. It measures the share of orders delivered both within the agreed window and complete, with every line and unit present. Because it requires both conditions on the same order, OTIF always reads lower than on-time or in-full measured separately. The word doing the work is both. An order […]
What Is Overstocking? Causes, Costs & How to Avoid It
Overstocking is holding more inventory than your demand justifies. The goods will probably sell eventually, and in the meantime they tie up cash you cannot spend, occupy space you are paying for, and carry the risk of dating before they clear. It is the quieter of the two inventory failures. A stockout announces itself — […]
What Is Sell-Through Rate? Formula & Example
Sell-through rate measures how much of the stock you received you managed to sell within a period, usually a month. Receive 200 units, sell 90, and your sell-through rate is 45%. Sell-through rate = (units sold ÷ units received) × 100 It is a buying measure before it is a sales measure. A low rate […]
What Is the Bullwhip Effect? Causes & How to Reduce It
The bullwhip effect is the tendency for small changes in customer demand to produce progressively larger swings in orders as they travel up a supply chain. A modest rise in sales at the shop becomes a bigger order to the distributor, a bigger one again to the manufacturer, and a large one to the raw […]
What Is a Stockout? Causes, Costs & How to Prevent It
A stockout is when a customer wants to buy something and you have none available. Also called an out-of-stock, or OOS, it means the sale is usually lost rather than delayed. Stockouts leave almost no trace in sales data, because the transaction never happened, which is why they are chronically under-measured. The defining characteristic, and […]
What Is a Stocktake? How to Do One (Step by Step)
A stocktake is a full physical count of everything you hold, checked against what your records say you hold. Known in the United States as a physical inventory count, it verifies stock quantities for the accounts and reveals discrepancies caused by mis-picks, damage, theft and unrecorded movements. It is the moment the system stops being […]
What Is Cycle Counting? Methods, Process & Best Practices
Cycle counting is a way of keeping stock records accurate by counting a small slice of your inventory every day or week, rather than shutting the business down once a year to count everything at once. Errors get caught within days instead of months, whilst the cause is still traceable. Instead of one giant, dreaded […]
What Is Fill Rate? Formula, Types & How to Improve It
Fill rate measures the share of demand you supplied completely from stock on hand, without a shortfall, a substitution or a backorder. Receive orders for 1,000 units and ship 940 of them from available stock, and your fill rate is 94%. Fill rate = (units or orders supplied in full ÷ units or orders ordered) […]
What Is GMROI? Formula, Example & What’s a Good GMROI
GMROI stands for gross margin return on investment. It measures how much gross profit you earn for every unit of currency invested in inventory — so a GMROI of 3.0 means each dollar tied up in stock returns three dollars of gross profit over the period. It is usually pronounced “jem-roy”. The value of the […]
What Is Inventory Optimisation? Strategies & How to Do It
Inventory optimisation is the practice of holding the right amount of each product in the right place to meet a chosen service level at the lowest total cost. It is the deliberate balancing of availability against the money and space that availability requires — product by product, rather than across a whole range. Written optimization […]