登录查看更多内容

What is the inventory turnover rate and how can you use it to make better purchasing decisions?

由人工智能和领英社区提供技术支持

If you are a merchandiser, you know how important it is to manage your inventory effectively. You want to have enough stock to meet customer demand, but not too much that it ties up your cash flow and storage space. One way to measure how well you are balancing these factors is by calculating your inventory turnover rate. This is a key metric that shows how often you sell and replace your inventory in a given period. In this article, you will learn what the inventory turnover rate is, how to calculate it, and how to use it to make better purchasing decisions.

在这篇协作文章中查找专家回答

由社区从 3 条内容中精选。了解更多

1 What is the inventory turnover rate?

The inventory turnover rate is the ratio of your cost of goods sold (COGS) to your average inventory value. COGS is the amount you spend on buying or producing the goods you sell. Average inventory value is the average of your inventory value at the beginning and end of the period. The inventory turnover rate tells you how many times you sold and replenished your inventory in that period. For example, if your COGS is $100,000 and your average inventory value is $25,000, your inventory turnover rate is 4. This means you sold and replaced your inventory four times in the period.

添加您的观点

Reema Sharma

VP at Simba Fashions Ltd.
举报内容
Inventory turnover rate measures how many times a company's inventory is sold and replaced over a period. It is calculated by dividing the cost of goods sold (COGS) by the average inventory during that time. A higher turnover rate generally indicates efficient inventory management.

已翻译

赞

2 How to calculate the inventory turnover rate?

To calculate the inventory turnover rate, you need to have two pieces of information: your COGS and your average inventory value. You can find your COGS on your income statement or calculate it by subtracting your ending inventory value from your beginning inventory value plus your purchases. You can find your average inventory value by adding your beginning and ending inventory values and dividing by two. Then, you can use this formula to calculate the inventory turnover rate:

Inventory turnover rate = COGS / Average inventory value

You can also express the inventory turnover rate as a number of days by dividing 365 by the inventory turnover rate. This gives you the average number of days it takes you to sell and replace your inventory.

添加您的观点

Reema Sharma

VP at Simba Fashions Ltd.
(已编辑)
举报内容
1. Determine the Cost of Goods Sold (COGS): This information is usually found on the income statement. 2. Calculate the Average Inventory: Add the beginning inventory and ending inventory for a specific period, then divide by 2. 3. Plug the values into the formula to find the inventory turnover rate. A higher turnover rate generally implies more efficient use of inventory, but optimal rates vary by industry.

已翻译

赞

3 Why is the inventory turnover rate important?

The inventory turnover rate is important because it reflects your inventory management efficiency and profitability. A high inventory turnover rate means you are selling your inventory quickly and generating revenue. It also means you are minimizing your inventory holding costs, such as storage, insurance, and obsolescence. A low inventory turnover rate means you are selling your inventory slowly and tying up your cash flow. It also means you are incurring higher inventory holding costs and risking losing sales to competitors or changing customer preferences.

添加您的观点

Reema Sharma

VP at Simba Fashions Ltd.
举报内容
Efficient Inventory Management Financial Performance- higher turnover provides insights into a company's financial performance. Operational Efficiency-Companies with a higher turnover rate may experience reduced stockouts and better respond to changes in customer demand, showcasing operational efficiency. Working Capital Management-Efficient inventory turnover can contribute to optimal working capital management. Risk Mitigation-It helps identify slow-moving or obsolete inventory, enabling proactive measures to prevent overstocking and potential losses. Industry Benchmarking-Companies can compare their turnover rates with industry averages to assess their competitiveness and efficiency relative to peers.

已翻译

赞

4 How to improve the inventory turnover rate?

To improve the inventory turnover rate, you need to optimize your inventory levels and sales performance. To do this, you should analyze your sales data and forecast your demand accurately. This can include looking at historical trends, seasonal patterns, market research, and customer feedback. Additionally, you should segment your inventory into different categories based on their sales volume, profitability, and turnover rate. Furthermore, it is important to implement an inventory replenishment system that triggers orders based on target stock levels and lead times. Automation, software, or vendor-managed inventory can help streamline the ordering process and reduce human errors. You should also negotiate better terms with suppliers to lower costs of goods sold (COGS) and increase margins. Finally, promote your inventory through effective marketing and pricing strategies like discounts, bundles, cross-selling, upselling, or loyalty programs to attract customers and increase sales volume and value.

添加您的观点

5 How to benchmark the inventory turnover rate?

To benchmark the inventory turnover rate, you need to compare your performance with your industry standards and competitors. You can use online databases, reports, or publications to find the average inventory turnover rate for your industry or sector. You can also use financial statements, websites, or trade associations to find the inventory turnover rate for your direct or indirect competitors. By benchmarking the inventory turnover rate, you can identify your strengths and weaknesses, set realistic goals, and implement best practices.

添加您的观点

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

添加您的观点

Merchandising

+ 关注

给文章评分

我们借助人工智能创建了此文章。您认为这篇文章怎么样？

很棒不太好

举报此文章

查看全部

What is the inventory turnover rate and how can you use it to make better purchasing decisions?

1

2

3

4

5

6

1 What is the inventory turnover rate?

2 How to calculate the inventory turnover rate?

3 Why is the inventory turnover rate important?

4 How to improve the inventory turnover rate?

5 How to benchmark the inventory turnover rate?

6 Here’s what else to consider

Merchandising

给文章评分

感谢您的反馈

更多Merchandising相关文章

更多相关阅读内容

What is the inventory turnover rate and how can you use it to make better purchasing decisions?

1

2

3

4

5

6

1 What is the inventory turnover rate?

2 How to calculate the inventory turnover rate?

3 Why is the inventory turnover rate important?

4 How to improve the inventory turnover rate?

5 How to benchmark the inventory turnover rate?

6 Here’s what else to consider

Merchandising

给文章评分

感谢您的反馈

查看其他技能