What is inventory turnover and how is it calculated

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Inventory rotation: How can it help improve your bottom line? Your inventory may be an untapped gold mine. If you manage it well, you will have access to the resources that you and your company's CFO want. However, poorly managed, inventory is nothing more than a big hole in the company through which money is shoveled, like a steam train that uses euro notes to climb a mountain. Supply chain inefficiency can destroy your bottom line and your bank balance. So how can you get the most out of your inventory? How can you get benefits from every penny you invest? And how can you ensure that your inventory generates money instead of consuming it? Less is more You want to make the greatest possible profits with the least amount of stock. Therefore, when it comes to inventory levels, less is more. It is not an easy goal. To get close to achieving it, you have to make every euro you spend count. That is why we have written this article. Throughout this blog, we will tell you everything you need to know about inventory rotation . We'll dive into how you can use your inventory turns to evaluate efficiency.

We will talk about what a “good” inventory turnover ratio is. And we'll even explore some practical strategies to speed up your inventory turns. Lets start by the beginning. What is stock rotation? Inventory turnover is a simple ratio. However, this powerful formula can reveal critical information about the health of your supply chain processes. Specific: How many times have you sold and replaced your stock during a given period? You can Japan Telegram Number Data calculate your inventory turnover ratio by dividing the cost of goods sold by the average value of inventory. Let's make it easy and logical and say it's a 12 month period. A higher stock turnover ratio would indicate a better sales strategy and a more effective approach to stock management. On the other hand, a lower inventory turnover index or ratio would show the opposite. Either you need to draw the attention of the sales team, or you have excess inventory that is difficult to dispose of.



Of course, this isn't always the case (and we'll talk about that later) but, in essence, inventory turnover is a very useful ratio. Now, we could apply the inventory turnover ratio to your entire assortment, to individual product categories, or even to a specific SKU. Although it is important to note that inventory turnover is based on an average. Why is inventory rotation important? Whenever you can, it is advisable that you get as accurate an idea as possible of your company's efficiency. The stock turnover ratio - which is another way of referring to the stock and inventory turnover ratio - can give you this picture. Your inventory turnover can reveal a lot about your business. Here are 3 of the most important reasons why you should pay close attention to your inventory turnover ratio : Why stock rotation is important Reason number one: cash flow You may think that having stock on site, ready and waiting to be sold, is an advantage for the business.