What KPIs to Track for Centralized vs. Decentralized Inventory Models
Choosing between centralized and decentralized inventory models affects every part of your operation — from delivery times and storage costs to stock visibility and customer satisfaction. But once you’ve chosen a model (or adopted a hybrid strategy), the question becomes: How do you measure whether it’s working?
The answer lies in the right KPIs — metrics that reveal how efficiently your model supports your customers, teams, and bottom line.
Here are the most important KPIs to track to evaluate and continuously improve your centralized or decentralized inventory strategy.
- Inventory Turnover Rate (by Location)
Why it matters:
Whether you’re centralizing or decentralizing, this KPI tells you how efficiently stock is moving.
How to use it:
Track turnover per warehouse, yard, or stocking point
Identify locations with overstock or aging inventory
Balance slow-moving SKUs back toward central stock to reduce carrying cost
Formula:
Cost of Goods Sold ÷ Average Inventory Value (by site)
- Stockout Frequency (by SKU and Location)
Why it matters:
Stockouts disrupt sales, delay jobs, and damage trust — especially if customers rely on nearby yards for fast service.
How to use it:
Compare centralized vs. decentralized stockout rates
Set alerts when fast-moving SKUs dip below safety thresholds
Analyze repeat offenders and adjust local stock policies
Goal: Minimize regional gaps while keeping stock lean.
- Transfer Volume and Lead Time Between Locations
Why it matters:
In decentralized models, stock balancing becomes a daily routine. But if transfers are slow or excessive, they eat up time and margin.
How to use it:
Track number and value of inter-yard transfers
Measure average time from transfer request to completion
Identify frequently moved SKUs that should be pre-positioned closer to demand
Goal: Reduce emergency transfers and optimize stocking logic.
- Freight and Transportation Cost per Order
Why it matters:
Centralized models often incur longer outbound hauls. Decentralized yards may run smaller, more frequent trips.
How to use it:
Break down freight spend by fulfillment source
Analyze cost-per-mile or per-delivery by site
Identify savings potential through smarter routing or consolidation
Compare:
Are decentralized shipments truly saving money, or just shifting the cost?
- Order Fulfillment Time (by Fulfillment Source)
Why it matters:
This KPI tells you how your inventory model affects speed — and ultimately, customer experience.
How to use it:
Measure time from order entry to delivery or pickup
Compare centralized vs. decentralized average turnaround
Use results to adjust stocking for rush-heavy or job-critical materials
Result: Aligns operational setup with what customers actually expect.
- Overstock Rate and Carrying Cost (by Site)
Why it matters:
Decentralized locations are more prone to duplication or “just-in-case” overstocking.
How to use it:
Set par levels by SKU + location in ERP
Monitor inventory value over 90/180/365 days on hand
Flag excess or dormant stock for transfer, discount, or return
Goal: Keep working capital free while still hitting service targets.
- Pick Accuracy and Warehouse Error Rate (by Site)
Why it matters:
With more locations comes more room for variation in process discipline and training.
How to use it:
Track errors per 1,000 picks by location
Compare centralized facility consistency vs. branch sites
Use results to target SOP reinforcement and system training
Bonus: Helps protect customer experience across geographies.
- Location Fill Rate (for Decentralized Sites)
Why it matters:
This measures how often local yards can fulfill orders without relying on transfers or central resupply.
How to use it:
Track fill rate % per decentralized yard
Identify which SKUs need better local stocking
Use to justify adjusting SKU mix or local reorder points
Goal: Make every yard more self-sufficient — without bloating inventory.
- SKU Redundancy and Duplication Metrics
Why it matters:
In decentralized models, carrying the same SKU in multiple locations can be efficient — or extremely wasteful.
What to measure:
How many SKUs are duplicated across 2+ sites
% of redundant SKUs with low velocity or aging stock
Potential cost savings from SKU rationalization or regional consolidation
Use ERP tools to:
Consolidate slow movers, reduce product overlap, and simplify reordering.
Final Thoughts
Centralized and decentralized inventory models aren’t just about layout — they’re about performance. With the right KPIs, you can validate your model, spot cost drains, and continuously adapt your strategy to match customer demand and operational capacity.
ERP visibility gives you the data — but knowing what to measure is what turns data into savings.
