Each day, inventory managers carry out the balancing act of ensuring products are readily available to meet customer demand while keeping excess stock to a minimum. At the heart of this equilibrium lies the need for accurate and timely inventory reporting.
As any inventory manager knows, however, inventory reporting can be a painstakingly manual process. Despite being a strategic and operational necessity that stands to inform company decisions and direction, inventory reporting often gets stuck within the confines of spreadsheets.
Reliance on manual spreadsheet reporting lends itself to a number of drawbacks aside from just time decay.
The good news, however, is that most inventory reports can be automated.
Here, we’ll look at the different inventory reports you can and should be automating (and why you should do so), including inventory days on hand, visibility reporting, and more.
Why is inventory reporting important?
From a general perspective, inventory reporting brings you heightened accuracy and efficiency in how you operate today, while providing you with a world of insights to inform how you operate tomorrow.
Inventory reporting gives you timely insights into what’s on hand, how long it’s been there, what’s incoming, what’s outgoing, and the operational efficiencies around each of those areas.
With those insights, you’ll be able to:
- Maintain much cleaner inventory levels
- Improve order and inventory replacement timing
- Improve micro and macro forecasting
- Enhance your relationships with customers and vendors
Overall, you will be able to better understand your efficiencies and deficiencies, reduce costs, and better set up your business to scale.
What gets in the way of consistent, accurate inventory reporting?
Timeliness and human error are the two biggest culprits here.
Relying on manual data entry across ordering, storing, and shipping each individual product in your warehouse opens up a multitude of different points for human error to occur and makes it inevitable.
By requiring human attention for data to be retrieved, logged, or updated, consistency is hard to come by, and you’ll not be operating at the speed you could be with an automated inventory system.
Why automate inventory reporting?
What are the precise reasons to automate your inventory days on hand and other reports?
1. Accuracy of data. This comes from making every effort to minimize human error.
2. Getting time back to do more business-critical tasks. By saving hours previously spent in spreadsheets, you’ll be able to spend more time on planning, forecasting, and making improvements to your inventory operations.
3. Standardizing your data. With more predictable, consistent workflows in place, you’ll be able to set stricter standards and operating practices for how your data is organized, recorded, and reported on.
4. Creating a single source of truth. Automation requires most, if not all of your systems to be connected digitally. What you also get from this is the ability to funnel all of your data into a single, centralized source of truth.
This will allow your team to manage data and collaborate all in one place, ensuring everyone in the company is operating on the same page, and that inventory data is more easily integrated into shipping, accounting, or other necessary business functions.
Above all else, automated inventory systems are set up to be scalable.
So as your operations grow, you’ll still be able to spend time on business-critical work and trust in the accuracy of your data reporting.
Inventory reports to automate
Below we’ll break down the different types of inventory reports you should automate and the reasons why you should do so, starting with inventory days on hand reporting.
Inventory days on hand
Inventory days on hand is a measurement of how long it takes to sell through your entire stock of inventory — it quantifies how many days you’ll be able to sustain your current sales rate with what’s available in inventory.
Inventory days on hand is one of the more critical pieces of information to keep track of to maintain efficient inventory management practices.
The inventory days on hand formula is:
Average inventory x Cost of goods sold (COGS) x 365
Average inventory is the average dollar amount of inventory you have over your entire accounting period (which in this example is one year). You can calculate that by adding your starting inventory number and your final inventory number, and dividing that by two.
If you divide that number by your total cost of goods sold and multiply by the number of days in your accounting period, you’ll have your number of days of inventory on hand.
For example, if your average inventory is $625,000, and your cost of goods sold was $3.2 million, you’d have about 71 days of inventory on hand.
There are a few different days on hand calculators you can refer to online to get a sense of how it can be measured.
Challenges of automating inventory days on hand reporting
There’s a lot of data required in automating your inventory days on hand report, so it can take quite the effort to maintain both accurate and up-to-date information. Then, all of that information needs to be aggregated and combined — parsing PDFs, extracting data, and updating inventory spreadsheets in real time can become very time consuming.
If your inventory DOH is low, that’s an indication that you’re operating efficiently — not overstocking and turning over inventory quickly. Low DOH also means liquidity. Less inventory on hand means more cash on hand, which can be used more flexibly to invest in other areas of the company.
Lastly, a lower DOH number also means less risk. With less cash tied up in your inventory, you can better mitigate risks in any situations where specific products lose their demand or have other issues.
By automating inventory days on hand reporting, you’ll have real-time visibility into whether you’re overstocking or understocking specific items. You’ll be able to automatically parse PDFs, integrate data on existing inventory and sales, and feed all of that into a dashboard for up-to-date status checks.
All of this information in place leads to increased adaptability and better forecasting. You can react more immediately in the short term to avoid having too much cash tied up into your inventory. You’ll also have more in-depth insights readily available to help you forecast demand and plan for future accounting periods.
Inventory consolidation and visibility
An inventory consolidation and visibility report is an overall comprehensive picture of the status, movement, and availability of all of your inventory, to be used to make sure you’re operating in the most optimal way possible.
Inventory visibility is a holistic view of your entire inventory, showing what is sitting and available, what is in motion, and so on. It’s the ability to measure inventory levels in real-time. Consolidation reports expand into the full supply chain, taking a look at inventory, but also vendors, ordering, and shipments, to see where consolidations can be made to save time and money.
Challenges of inventory consolidation and visibility Reporting
The challenges here are largely similar to that of DOH reporting. Aggregating all of this data typically takes a lot of time and effort. Keeping it up to date and managing that data takes even more time.
Automating inventory consolidation reporting will allow you to automatically and regularly update your spreadsheets to include the most recent, accurate inventory data to ensure efficiency, cost savings, and improves decision-making and forecasting.
Backorder reporting
Backorder reporting shows the number of items that were unavailable to be shipped at the time of order, and thus backordered. Within this report, you’ll see detailed reporting of what happened, including the reason for backorder, the customer, and a whole line of other documentation.
Challenges of backorder reporting
The biggest challenge here is timeliness in both identifying items that have been backordered and quickly fulfilling those orders, and also in managing communications around backordered items.
By automating your backorder reporting process, you’ll have immediate updates and awareness when items have been backordered.
You can automate notifications as well as triggers for communications and even automatically send emails or messages upon an item being deemed backordered. Automations can help you gather more in-depth data to avoid order backlogs and prevent future stockouts.
Bundle explosion reporting
Bundle explosion reporting is the process of “exploding” — in other words, isolating — bundled inventory items into individual items for the sake of tracking their status and history.
Challenges of bundle explosion reporting
You may have an array of products under a single bundle. The act of isolating all of those items takes a lot of time and manual work. Not only are individual items different, but bundles themselves are also constructed differently, and with varying levels of complexity, and dynamic, variable pricing.
By automating bundle explosion, you can speed up the reporting process for any number of dynamic item configurations. As bundles grow or rotate, it’ll be much easier to update and scale your reporting.
Inventory reconciliation
Inventory reconciliation is the process of comparing and aligning your actual inventory on hand with what is recorded within your inventory management systems.
Like most types of inventory reporting, all of the manual work that is required here is a major challenge. It often takes hours to pull in the data that your warehouses or 3PLs provide because it's all in spreadsheets in different formats. And if you're dealing with multi-warehouse inventory reconciliation, the time it takes to manually manipulate and manage all this data is magnified — not to mention the room for error that comes with even more manual data entry.
If your reconciliation report is automated, you’ll always have recorded data and inventory on hand numbers readily available. Instead of needing to tally up these numbers in real-time, they’ll be sitting there awaiting your validation.
Inventory burndown
Inventory burndown is the process of tracking the time-lapse depletion of your inventory levels over a specific period. It essentially tracks the speed of inventory being reduced, so you can project timelines to when your inventory will be fully depleted.
Challenges of Inventory Burndown
Tracking burndown across all of your individual items over varying time periods (daily, weekly, monthly) can be extremely time-consuming when done manually. Additionally, burndown reports are best presented visually, typically in line graphs. Between different chronologies and product lines, this becomes a project of its own, and can be difficult to set up in Excel.
By automating inventory burndown, you’ll have an always-on burndown tracker to monitor real-time inventory levels and continuously update graphs as needed. It ensures accuracy and speed across any level of nuanced data.
ABC inventory
ABC inventory reporting is a method of categorizing and prioritizing inventory items based on their significance or importance, measured in value generated. The idea is to classify inventory items as Class A, B, C, and so on.
Class A items are the most significant. As Netsuite highlights, these items can be looked at in the vein of Pareto’s 80/20 principle—they’ll likely make up around 20% of your stock, but about 80% of your sales/value.
Class A items are those that drive the most value, but don’t typically require a large effort or cost to dispense.
Challenges of ABC inventory reporting
Extracting data across sales and stock numbers—whether from PDFs or spreadsheets—and organizing them in Excel, is another time-consuming venture. The timeliness of that information is very paramount, as well. Classifications for specific items might need to be rotated quarterly, if not monthly.
By automating ABC inventory reporting, you can have sales and inventory numbers auto-extracted and updated within your spreadsheets for easier reporting. You can also set up these updates to happen in real-time, fueling better adaptability to rotating classifications per different seasons.
All in all, the benefits you get across individual inventory reports are similar—you boost efficiency, work much faster, and gain time back to work on more business-critical projects.
When considering the amount of different reports needed on a regular basis, however, the benefits stack up in a profound way, and leave you with a much more scalable way to manage your inventory.
