For high-volume distributors in the building materials industry, inventory audits are more than just a compliance task — they’re a vital checkpoint for profitability, fulfillment accuracy, and operational efficiency. But the real value of an audit doesn’t come from just counting stock. It comes from what you track and learn during the process.
Whether you’re running cycle counts, full physical audits, or ERP-based verifications across multiple yards, knowing which KPIs (Key Performance Indicators) to monitor is key to driving smarter decisions.
Here’s a breakdown of the most important KPIs to track during inventory audits — and how they can help uncover hidden risks, improve workflows, and tighten up control at scale.
- Inventory Accuracy Rate (%)
What it tells you:
How closely your recorded inventory matches what’s physically in the warehouse or yard.
Why it matters:
This is the single most important metric for audit health. A low accuracy rate leads to stockouts, overstock, returns, and missed revenue.
How to track it:
(Total correct item counts / Total items counted) × 100
✔ Target: 97–99%+ for high-performance operations
- Audit Completion Rate
What it tells you:
How much of your planned audit was actually completed, and on schedule.
Why it matters:
Missed or skipped audits lead to blind spots. High completion rates show that your processes are manageable and your team is executing.
How to track it:
(Audited items or zones / Planned audit scope) × 100
✔ Monitor weekly/monthly depending on your cycle count frequency
- Variance Rate by SKU or Zone
What it tells you:
Where your biggest inventory mismatches are occurring — either by product type or location.
Why it matters:
Spotting trends in discrepancies helps you pinpoint root causes (e.g., mispicks, mislabeling, shrinkage, or training gaps).
How to track it:
Number of items with quantity variance / Total items counted
✔ Track both total variance and high-value SKU variance separately
- Time to Resolve Variances
What it tells you:
How quickly your team responds to and resolves inventory discrepancies.
Why it matters:
Slow variance resolution causes delays in replenishment, inaccurate reporting, and frustrated sales or fulfillment teams.
How to track it:
Average time (in hours/days) between variance detection and resolution
✔ Use ERP timestamp logs to monitor and improve this KPI
- Value of Inventory Adjustments
What it tells you:
The dollar impact of overages, shortages, and write-offs identified during your audits.
Why it matters:
This is your financial audit health metric. Frequent high-value adjustments may indicate deeper systemic issues.
How to track it:
Total value of positive and negative adjustments over time
✔ Segment by SKU category or warehouse for clearer insights
- Shrinkage Rate
What it tells you:
The percentage of inventory lost due to damage, theft, unrecorded usage, or process errors.
Why it matters:
High shrinkage means lost profit — and possibly deeper control issues that require immediate attention.
How to track it:
(Lost inventory value / Total inventory value) × 100
✔ Aim for <1.5% annually in most warehouse environments
- Cycle Count Frequency and Coverage
What it tells you:
How often you’re auditing your inventory — and what percentage of SKUs are being reviewed on a rolling basis.
Why it matters:
Frequent, targeted audits reduce surprises and improve accuracy over time.
How to track it:
Track by SKU classification (A/B/C items), zone, or product family
✔ Use ERP rules to auto-schedule counts based on item risk or value
- Audit Disruption Score
What it tells you:
How much your audit process impacts day-to-day operations.
Why it matters:
A streamlined audit shouldn’t bring your warehouse to a halt. If it does, it’s time to reassess your tools or scheduling.
How to track it:
Monitor delays in picking, order fulfillment, or receiving during audit periods
✔ Track feedback from warehouse leads or use ERP order cycle metrics
Final Thoughts
Inventory audits aren’t just a check-the-box exercise — they’re a performance benchmark. By tracking the right KPIs, you can turn your audits into a continuous improvement tool that uncovers inefficiencies, strengthens accuracy, and fuels smarter decisions across every location.
With the right ERP integration and reporting setup, these KPIs move from reactive snapshots to real-time operational insights.
