What KPIs to Track for Centralized vs decentralized inventory models

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.

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)

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.

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.

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?

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.

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.

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.

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.

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.

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