![]() You can use shipments or consumption of components or raw materials. Sales or Consumption: the sales made over that same period.Average Inventory Value: the average inventory available over a period.“How many times does my stock turn over?” In other words, it answers the following question : The inventory turnover ratio is used to assess if the stock is excessive compared to the sales. The Inventory turnover ratio can be measured at any point in the chain (and also globally) Inventory Turnover meaning and formulas Inventory Turnover ratio formula Whether it is stocked items or goods in transit, it is possible to measure the corresponding stock turnover at the SKU level or globally. This KPI can be tracked at each step of the chain: from the raw material to the factory, the warehouse, the transportation network, and the distribution network. So, to lower your stocks and improve your cash flow, you need good inventory management. For example, You have more money to invest in new products, better marketing processes… If the investments are a success, you will have more sales and more profits: more free cash flow. Less inventory means more cash available (free cash flow) for investments. Here, we focus on the bottom right of the pyramid: The on-hand inventory is directly related to the amount of cash available.Īs stated by Warren Buffet, “Cash is King”: improving your inventory management strategy is critical for the profitability of your company. Profitability is achieved if we keep a high level of Service, while minimizing Costs and Inventory. If you want to have a profitable Supply Chain, you need to track 3 main pillars: Service, Costs, and Inventory. You can also download the Excel used in the video and this article here : Why is the Inventory Turn KPI so important? What is the inventory turnover ratio? Why is this KPI important? What is the formula?Ĭheck my video below with a step-by-step tutorial. And I am always surprised to see so many companies not tracking correctly this crucial indicator, or even not tracking it at all. I’ve been using this KPI for the last 15 years as a demand planner, Supply Chain Manager, S&OP Manager, Supply Chain Director, and Consultant. In my opinion, it is one of the most important KPIs in Supply Chain.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |