Distribution KPI formula sheet

A one-page summary of the formulas used across our distribution guides. Each metric name links to its full guide and calculator. Every formula here is standard, but the inputs are where numbers go wrong. Before comparing a metric across periods, sites or companies, confirm that the inputs were measured the same way.

Measure it the same way every time

Pick one averaging method, one cost basis and one period length for each metric, write them down and keep them.

Inventory

These measure how much stock you hold, how fast it moves and how accurate the records are.

Metric	Formula	Better when
Average inventory	(Beginning inventory + ending inventory) ÷ 2, or the average of month-end balances	n/a
Inventory turns	Cost of goods sold ÷ average inventory at cost	Higher, within reason
Days on hand	Days in period ÷ inventory turns	Lower, within reason
Inventory-to-sales ratio	Month-end inventory ÷ sales for the month	Lower, within reason
GMROI	Gross margin $ ÷ average inventory at cost	Higher
Inventory record accuracy	Counted locations within tolerance ÷ locations counted	Higher

Customer service

These measure how completely and how promptly you ship what customers order.

Metric	Formula	Better when
Line fill rate	Lines shipped complete on first shipment ÷ lines requested	Higher
Unit fill rate	Units shipped on first shipment ÷ units requested	Higher
Order fill rate	Orders shipped complete on first shipment ÷ orders	Higher
OTIF	Orders delivered on time and in full ÷ orders	Higher

Working capital

These measure how long cash is tied up between paying suppliers and collecting from customers.

Metric	Formula	Better when
DSO	Average accounts receivable ÷ revenue × days in period	Lower
DIO	Average inventory ÷ cost of goods sold × days in period	Lower
DPO	Average accounts payable ÷ cost of goods sold × days in period	Higher, within terms
Cash conversion cycle	DSO + DIO − DPO	Lower

Replenishment and cost

These set when to reorder and how much to buy, and give the landed cost of an item.

Metric	Formula	Unit
Reorder point	Average daily demand × average lead time in days + safety stock	units
Safety stock	z × √(lead time × σ demand² + average demand² × σ lead time²)	units
Economic order quantity	√(2 × annual demand × order cost ÷ annual carrying cost per unit)	units
Landed cost per unit	(Goods + freight + duty + other costs) ÷ units	$ per unit

In the safety stock formula, σ is standard deviation, demand is measured per day and lead time is measured in days. z is the number of standard deviations for the service level you want (about 1.64 for 95%).

Pricing

These convert between cost, price and margin, and put an annual rate on a skipped supplier discount.

Metric	Formula	Unit
Gross margin %	(Price − cost) ÷ price	%
Markup %	(Price − cost) ÷ cost	%
Price for a target margin	Cost ÷ (1 − target margin)	$
Cost of passing up an early-pay discount	Discount % ÷ (100% − discount %) × 365 ÷ (net days − discount days)	% a year

Forecast accuracy

These produce a simple forecast and measure how far it misses.

Metric	Formula	Better when
Moving average forecast	Sum of the last n actuals ÷ n	n/a
Exponential smoothing	α × latest actual + (1 − α) × previous level	n/a
Mean absolute error (MAE)	Average of the absolute difference between actual and forecast	Lower
MAPE	Average of absolute error ÷ actual, as a percentage	Lower
Bias	Average of (actual − forecast)	Closer to zero

Margin and markup

Margin and markup are the most commonly confused pair in distribution pricing. A 25% markup on cost is a 20% margin on price. To convert, or to try your own numbers in the calculator on Pricing and margin:

From	To	Formula
Markup	Margin	Markup ÷ (1 + markup)
Margin	Markup	Margin ÷ (1 − margin)