5 key inventory management benchmarks
With inflationary pressures still hitting some parts of the world while volatile economic conditions stabilise in other areas, now is a great time to take stock of how your business is performing compared to your peers.
Let's take a quick look at the top inventory management benchmarks for 2024.
1. Average inventory turnover rate
The average inventory turnover rate across sectors in 2024 is 8.5.
The Financial sector currently has the highest average inventory turnover rate, at 227.67 while the lowest turnover rate is Capital Goods, at 2.67. Retail sits around 11.32 (7.84 for technology).
2. Inventory accuracy benchmark
58% of retail brands and D2C manufacturers have below 80% inventory accuracy.
This figure is slightly higher (62%) for organisations in Australia and the USA. But what’s causing such low accuracy? The report sharing this data cited challenges such as the frequency of ERP software updates, legacy integration issues, and a lack of centralised data management as common causes.
3. Average overstock costs
The average business holds USD 142,000 worth of inventory above what’s required to meet demand.
These figures climb to over USD 200,000 for Australian and New Zealand organisations, reaching up to USD 300,000 for some sectors including Construction, Machinery, and Medical Supplies. This is likely a result of increased caution due to volatile market conditions over the past few years.
4. Warehousing costs
Global warehousing property costs grew 10.1% in 2023.
These costs include rent, service charges and taxes. Rental costs grew by 11.8% compared with 2022. Labour and electricity costs have both risen, but diesel costs were down year on year. On a positive note, the rate of increases appears to be slowing.
5. Average manufacturing labour costs as a percentage of revenue
Labour costs account for 20% of manufacturing revenue on average.
This figure has climbed in the past three years, but only marginally (up from 19.5% in 2022). SMEs have the highest labour costs (27.7% of revenue), while businesses in the USD 40 million to 100 million turnover range sit below 20% on average.
14 important inventory management statistics for 2024
These warehousing, supply chain, and inventory management statistics will help you better understand what’s going on in the market, so you can adapt your strategies and measure performance against other sectors and business models.
1. Inventory shrinkage
Manufacturers anticipate inventories shrinking by 1.6% in the coming 12 months.
More than 40% of manufacturers expect inventory to shrink in the coming year. 17.8% anticipate they’ll grow. The remainder are predicting no change.
This could reflect a correction of post-pandemic overstocking, using “particularly aggressive” inventory reduction goals to get away from holding more stock than they need.
2. B2B sales revenue
Manufacturing profit margins fell by as much as 25% across NZ, Australia and the UK in Q2 of 2024.
Strong efforts to increase sales have been negatively impacted by rising costs, which have eaten away at global profit margins. With customers remaining sensitive to pricing fluctuations, many business owners are reluctant to pass these costs on.
Despite stretched margins, sales are still doing well. Average revenue was up in both the UK and Australia, but down in New Zealand.
3. Manufacturing lead times
Customer lead times (in days) have improved by as much as 39% in Australia, NZ and the UK.
Reducing lead times means customers are getting their goods more quickly. By improving this metric, manufacturers can sell through their stock at a higher rate, trim back those overstock levels, and increase customer satisfaction at the same time.
4. Labour shortages
62% of leaders expect labour shortages to be a major short-term challenge.
Labour shortages seem to be a never-ending challenge for businesses, especially those in the Supply Chain and Manufacturing sectors. Attracting and retaining talent is a top-cited business challenge among manufacturers, and supply chain leaders say that access to talent is stymying support for their digital ambitions.
5. Customer satisfaction
28% of warehouse leaders cite ‘improving customer satisfaction’ as the number one priority.
Order-picking accuracy, order lead time, and on-time shipping rate are the main metrics by which warehouse teams measure their efficiency. Despite customer satisfaction being such a high priority, it’s rarely measured.
Rapid delivery is likely to be a high priority among your customers as it’s another top-cited challenge. Some fulfilment teams are tackling this by shifting focus from major fulfilment centres to micro-fulfilment centres (66%) and in-store fulfilment (65%).
6. Sustainable products
80% of consumers care about the environmental impact of the products they purchase.
Consumers are willing to pay more to access sustainable goods and most (71%) would choose a sustainably made product if it was priced the same as an equivalent unsustainable product.
7. Cancelled order rates
Nearly 40% of retailers and D2C manufacturers cancel at least 10% of their customer orders.
Most organisations have a cancelled order rate of between 6–10%. Over 38% are above this benchmark. This reflects a reputation and customer satisfaction risk for businesses with high cancellation rates – customers that can’t get the items they need from one business are wont to shop somewhere else, which often means a competitor brand.
8. Commercial and contract management (CCM)
27% of manufacturing and processing companies have adopted technology such as AI and integrated data systems in the contracting process.
The main drivers for technology adoption in CCM are improving operational performance (72%), reducing cycle times (49%), and reducing costs (47%). Factors which were important for other sectors (such as audit trails and regulatory compliance) were not big issues for manufacturing.
The top three use cases for technology in CCM are creation and drafting, reporting, and obligation extraction.
9. Direct-to-consumer sales
Over one-third of companies that prioritised new-business building (such as launching a D2C sales channel) saw greater revenue outcomes during COVID-19 than companies that prioritised other growth strategies.
Researchers noted that D2C is often discounted as a smart option because leaders perceive it to have unclear benefits. But they found it had a big impact on shareholder value, increasing value by 30% in 10 years compared to firms without a D2C offering.
- Learn more: D2C Explained: Direct-to-Consumer Business Guide
10. Supplier reliability
72% of SMEs are experiencing unpredictable delivery times from suppliers.
Unreliable suppliers were reported as the biggest driving factor for slow delivery times in 2024. Long lead times were the second-most cited challenge, followed by minimum order quantities and supplier costs.
11. Nearshoring
Only 25% of US companies prefer offshore suppliers compared to domestic.
Recent impacts on the global supply chain have rocked the manufacturing, wholesale, and retail sectors. A reliance on overseas suppliers (while appearing cheaper at times) may lead to increased complexity.
62.3% of US companies are planning to increase investment in domestic supply, backed up by two-thirds of respondents from another survey obtaining more input from suppliers located closer to their production sites.
12. Supply chain challenges
58% of supply chain managers cite risk management and supply chain resilience as their biggest supply chain challenges.
Regulatory and compliance pressures were also cited as a major problem (54%), followed by budget constraints (47%) and technology (39%).
A company with a strong idea of what to do in case of emergency is better placed to survive unstable conditions and unexpected changes. Investing in a good business continuity plan is more important than ever.
13. Mitigating supply chain challenges
Diversification and supplier management are the most-cited methods of mitigating supply chain challenges.
Other mitigation methods included quality and monitoring, operational efficiency and planning, compliance and planning, and technological innovation.
Improving supply chain resilience requires a multi-faceted approach involving smart business continuity planning, rethinking suppliers and their locations, and strong in-house knowledge of current compliance standards.
14. Supply chain visibility
79% of supply chain leaders use dashboards for end-to-end visibility.
Solving the issue of visibility in the supply chain is a major priority of most organisations, with 71% of companies intending to revise current planning processes and governance within three years.
Real-time visibility is commonly cited as an important solution, but only a quarter of supply chain and logistics leaders are using real-time tracking for their shipments.
If supply chain visibility is a problem for your organisation, real-time tracking is the solution. Cloud-based inventory software can bolster transparency, enabling you to make strategic decisions based on historical data and ongoing trends.
