Rental inventory management metrics to track

Rental inventory management is more complex than traditional retail or manufacturing inventory.

Unlike selling products, renting involves multiple transactions for the same item over time.

This creates unique challenges for your business too.

Let's go through the challenge one by one,

• Availability: You have to ensure the right equipment is available when customers need it.
• Utilization: Maximizing the use of each asset to generate revenue.
• Maintenance: Maintain each piece of equipment to avoid downtime.
• Customer satisfaction: Delivering on promises to build trust and loyalty.

Tracking the right KPIs and metrics helps you address these challenges.

Wondering how?

It allows you to:

• Identify underperforming assets.
• Optimize pricing and rental periods.
• Reduce costs associated with maintenance and downtime.
• Improve customer satisfaction and retention.

Now, let's explore the essential KPIs and metrics you should be tracking.

1. Utilization rate

What it is - The percentage of time your equipment is in use compared to its total available time.

A high utilization rate indicates that your assets generate revenue, while a low rate may suggest overstocking or poor demand forecasting.

How to calculate

Utilization rate = (Total rental hours/Total available hours) * 100

Benchmark

Aim for a utilization rate of 60-80%.

Here’s the reason: Rates below 50% may suggest inefficiencies, while rates above 90% could result in overuse, leading to increased maintenance costs.

2. Revenue per asset

What it is - Measures the revenue each piece of equipment generates.

This metric helps you find the most profitable assets and make informed decisions about purchasing, retiring, or promoting specific items.

How to calculate

Revenue per asset = Total revenue/Number of assets

Benchmark

Find the high-performing and underperforming equipment by comparing this metric across categories.

3. Downtime rate

What it is - The percentage of time your inventory is unavailable for rent due to maintenance, repairs, or other issues.

Your inventory might not always be available to renters. The reason could be anything, such as maintenance, repairs, etc.

High downtime rates can lead to lost revenue and increased operational costs.

How to calculate

Downtime rate = (Total downtime hours/Total available hours) * 100

Benchmark

Aim to keep downtime below 10%.

Regularly analyze the causes of downtime to elevate the maintenance processes.

4. Rental yield

What it is - Measures revenue generated per rental period (day, week, or month) relative to an asset's value.

Rental yield helps you assess the profitability of individual assets.

How to calculate

Rental yield = (Revenue per rental period/Asset value) * 100

Benchmark

Compare rental yields across assets to identify which items are delivering the best return on investment (ROI).

5. Customer return rate

What it is - The percentage of customers who return for another rental.

A high return rate indicates customer satisfaction, while a low rate may signal issues, with equipment quality, pricing, or service.

How to calculate

Customer return rate = (Number of returning customers/Total customers) * 100

Benchmark

Aim for a return rate of 40% or higher.

To understand what stopping your existing customers from returning, you can ask for feedback directly from them.

6. Maintenance cost per asset

What it is - The average maintenance cost for each piece of equipment.

High maintenance costs can eat into your profits, while low maintenance costs may indicate inadequate maintenance, which leads to higher downtime.

How to calculate

Maintenance cost per asset = Total maintenance costs/Number of assets

Benchmark

Track this metric over time to identify trends and optimize maintenance schedules.

7. Order fulfillment rate

What it is - The percentage of customer orders fulfilled on time and without issues.

A higher fulfillment rate means your customers are satisfied and more likely to become repeat customers.

How to calculate

Order fulfillment rate = (Number of successful rentals/Total rental requests) * 100

Benchmark

Aim for a fulfillment rate of 95% or higher. Analyze the causes of failed rentals to improve processes.

8. Average rental duration

What it is - The average length of time customers rent your equipment.

Understanding rental duration helps you optimize pricing, inventory levels, and marketing strategies.

How to calculate

Average rental duration = Total rental hours/Number of rentals

Benchmark

Compare rental durations across categories to identify trends and adjust your offerings accordingly.

9. Inventory turnover ratio

What it is - Measures how frequently your inventory is rented and replaced over a given period.

It indicates strong demand, while a low ratio may suggest overstocking or poor demand forecasting.

How to calculate

Inventory turnover ratio = Cost of rentals/Average inventory value

Benchmark

Aim for a turnover ratio that aligns with industry standards for your specific rental category.

10. Customer acquisition cost (CAC)

What it is - The average cost of acquiring a new customer.

Understanding CAC helps you evaluate the effectiveness of your marketing efforts and ensure profitability.

How to calculate

CAC = Total marketing and sales costs/Number of new customers

Benchmark

Compare CAC to customer lifetime value (CLV) to ensure sustainable growth.

Remember, the goal isn't just to collect data, but to use that data to drive actionable insights and continuous improvement.

Start implementing these KPIs today, and watch your rental business thrive.