Notes from the stockroom
Formula-first guides to the unglamorous math that keeps shelves full and cash unfrozen. Written for operators, not consultants.
GMROI: Formula, Benchmarks and How to Improve It
GMROI (gross margin return on investment) shows how many dollars of gross margin each dollar of inventory earns. The formula, a worked example, what counts as a good GMROI by category, how it differs from turnover, and the three levers that move it.
ABC vs XYZ Analysis: The Difference and How to Combine Them
ABC analysis ranks inventory by value; XYZ ranks it by demand variability. How each works, the nine-box ABC-XYZ matrix with a stocking policy for every cell, how to run the analysis, and how often to reclassify.
How to Value Inventory for Taxes: Methods, Rules and COGS
How US businesses value inventory for federal taxes: the small-business exemption from Section 471, FIFO vs LIFO vs specific identification, lower of cost or market, the retail method, UNICAP, and what the rules actually allow when stock goes obsolete.
Consignment Inventory: How It Works, Pros and Cons, and the Accounting
Consignment inventory lets a supplier stock goods at your location while keeping ownership until they sell. How the model works, who carries the risk, the pros and cons for each side, and how to record it in your books.
Par Level Inventory: What It Is and How to Set Par Levels
A par level is the minimum quantity of an item you keep on hand before reordering back up to full. How par levels work, the formula to set them, a worked restaurant example, and where fixed pars quietly go wrong.
How to Reduce Supplier Lead Time (9 Practical Ways)
How to reduce lead time: measure it honestly, order to a forecast, hold safety stock on the slow items, dual-source, and tighten your own receiving. Shorter lead times mean less safety stock and fewer stockouts.
What Is Landed Cost? Formula, Components and How to Calculate It
Landed cost is the all-in cost of getting a product to your door: product price plus shipping, customs, insurance and overhead. The formula, a worked per-unit example, why it beats the supplier price for pricing, and how it feeds reorder decisions.
Just-in-Time Inventory (JIT): How It Works and When to Use It
Just-in-time inventory orders stock only as you need it, cutting holding costs but raising stockout risk if forecasting or suppliers slip. How JIT works, its trade-offs, JIT vs safety stock, and how to run a hybrid that stays lean without running out.
Min/Max Inventory: How the System Works and How to Set Levels
A min/max inventory system sets a minimum that triggers a reorder and a maximum you top up to. The formulas for both levels, a worked example, min/max vs a plain reorder point, where static levels break, and how to make them dynamic.
How to Avoid Stockouts: 7 Ways to Stop Running Out of Stock
How to avoid stockouts: set reorder points to real lead times, hold the right safety stock, forecast demand per SKU, watch fast movers, and clear the shelf space dead stock is stealing. A practical seven-step playbook.
What Is a SKU? Stock Keeping Unit Meaning, Examples and How to Set One Up
A SKU (stock keeping unit) is a unique internal code you assign to each distinct product variant so you can track it. What a SKU is, how it differs from a UPC, a worked naming example, and the rules for building a SKU system that scales.
How to Do a Physical Inventory Count (Step by Step)
How to do a physical inventory count: freeze movement, count in teams with a clear map, reconcile against your records, investigate the variances and adjust the books. A practical step-by-step process plus how cycle counting replaces the annual scramble.
What Is a Good Inventory Turnover Ratio? (Benchmarks by Industry)
What is a good inventory turnover ratio: for most industries 4 to 8, but grocery runs far higher and furniture far lower. Real benchmark ranges by industry, why higher is not always better, and how to read turnover per SKU.
How to Reduce Inventory Carrying Cost (6 Practical Levers)
How to reduce inventory carrying cost: clear dead stock, right-size safety stock, order smaller and more often, tighten reorder points, forecast better and prioritize with ABC. Carrying cost runs 20 to 30 percent of inventory value a year.
How to Forecast Inventory Demand (Methods and a Practical Process)
How to forecast inventory demand: start with clean per-SKU sales history, pick a method that matches each product, adjust for seasonality and trend, measure your error, and feed the forecast into live reorder points.
How to Calculate Inventory Turnover (Formula, Example, Days)
How to calculate inventory turnover: divide cost of goods sold by average inventory. A worked example, converting turnover to days, what a good ratio looks like, and why per-SKU turnover beats one company number.
How Much Safety Stock Should You Hold? (Formula and Service Levels)
How much safety stock to hold: size it to your worst-case demand and supply over one lead time. Two formulas, how service level changes the number, and why the right buffer is different for every SKU.
How to Sync Inventory Across Multiple Sales Channels
How to sync inventory across Shopify, Amazon and eBay: pick one source of truth, map every listing to a shared SKU, and use real-time sync to stop overselling. The setup order that holds up under volume, plus where forecasting fits.
How to Calculate Inventory Value: FIFO, LIFO and Weighted Average
How to calculate inventory value: quantity times unit cost per SKU, and how FIFO, LIFO and weighted average change the number. A worked example, a comparison table, and why the method changes your COGS and taxable profit.
How to Reduce Inventory Without Causing Stockouts
How to reduce inventory the right way: clear dead stock, right-size reorder points to real lead times, order smaller and more often, and buy to a forecast, SKU by SKU. A five-step sequence plus how much stock you should actually hold.
Inventory KPIs: The 7 Metrics That Actually Matter
The inventory KPIs worth tracking: turnover, days of inventory on hand, sell-through, stockout rate, GMROI, carrying cost and inventory accuracy. What each one tells you, the formula, and how often to review them.
Days of Inventory on Hand (DIO): Formula, Benchmarks and How to Lower It
Days of inventory on hand (DIO) = average inventory divided by COGS, times 365. The formula, a worked example, benchmarks by sector, how it relates to turnover and the cash conversion cycle, and five ways to bring it down.
Inventory Optimization: Techniques to Cut Stock Without Stocking Out
Inventory optimization holds the least stock that still meets your service level, SKU by SKU. What it is, why it frees working capital, five techniques (ABC, forecasting, safety stock, reorder points, dead-stock control) and how to measure it.
Perpetual vs Periodic Inventory: Which System to Use and How COGS Differs
Perpetual inventory updates stock and COGS continuously; periodic updates them at set counts. The difference at a glance, how COGS is calculated in each, which to use, and why perpetual systems still cycle count.
Inventory Shrinkage: Formula, Causes and How to Reduce It
Inventory shrinkage is the gap between recorded stock and what is actually on the shelf. The shrinkage formula, a worked example, the four main causes (theft, error, fraud, damage), average US retail rates, and how to cut it.
Inventory Carrying Cost: Formula, Percentage and How to Lower It
Inventory carrying cost is what it costs to hold stock: capital, storage, service and risk. The formula, the four cost buckets, why the rule of thumb is 20 to 30 percent a year, a worked example, and how to bring it down.
Cycle Counting: What It Is, Methods and How Often to Count
Cycle counting explained: how it beats the annual physical count, the three methods (ABC, random sample, control group), count frequencies by class, and what to do with discrepancies.
ABC Analysis in Inventory Management: Formula, Classes and a Worked Example
ABC analysis ranks SKUs by annual consumption value: A items carry ~80% of value, B ~15%, C ~5%. The formula, a worked 10-SKU example, the policies per class, and where the method breaks.
Inventory Turnover Ratio: Formula, Benchmarks and What Good Looks Like
Inventory turnover ratio = COGS divided by average inventory. The formula, a worked example, benchmarks by sector, and the two traps that make a healthy-looking ratio lie to you.
Economic Order Quantity (EOQ): The Formula and When to Trust It
The EOQ formula explained with a worked example: how to price ordering cost and holding cost properly, what the model assumes, and where those assumptions break.
Inventory Management in Excel: How to Build It, and When to Stop
The columns and formulas an inventory spreadsheet actually needs, plus the three specific events where Excel stops being enough and starts costing you money.
Safety Stock: What It Is and How to Calculate It
The safety stock formula explained with worked examples: Z-scores, demand variability, lead time variability, and when a simple half-lead-time buffer is enough.
Reorder Point Formula: How to Calculate When to Reorder
Reorder point = demand during lead time + safety stock. What each term means, a worked example, and why static reorder points quietly go stale.
Dead Stock: Why It Happens and How to Clear It
How to define dead stock, measure how much cash it freezes, clear it without training customers to wait for discounts, and stop buying it in the first place.
Stockouts: The True Cost of Running Out
A stockout costs more than the missed sale: substitution, lost customers, and ad spend pointed at empty shelves. How to measure and prevent them.
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