They all refer to inventory ratios reflecting the number of times your products are sold and replaced in a given period. Inventory turnover is known by several names, including inventory turnover ratio, stock turnover, inventory turn or stock turn. Learn more about inventory turnover, how it applies to your business, common calculations and how you can improve this metric. And when you know the key calculations, you can benchmark your industry turnover against your industry’s specific circumstances. Reviewing inventory turnover is an essential step in effective inventory management, which helps you fulfill orders, keep inventory in balance and plan for business milestones such as adding locations or product lines. This will help you order new stock of your best items and also quickly discover which items could potentially become dead inventory, allowing you to make discounts for those items at the right time before their overstay in the inventory impacts your capacity to adjust to increased demands for the other items.Do you know how to calculate inventory turnover? This critical business metric informs your day-to-day inventory management decisions and strategies to help you continue to scale. How? You will get a real-time overview of your inventory as it gradually sells. Automate purchase ordersįinally, automating your systems for processing orders and inventory tracking will also help you improve your inventory turns. Uncovering these patterns will help you improve forecasting of expected demand for the items you sell. Several industries feature seasonal changes for example, the demand for light clothing will peak at summertime and will be lowest during winter. You should look at how the demand changes over time. Your inventory size should depend on the market demand, which can change over time. Is it the sales pitch? Is it inventory management? Or is it the new products? Improve forecasting If they have fast inventory turns, it means that they are doing something right. You will benefit from analyzing the inventory turns of your competitors in your industry, because they can serve as benchmarks to what can potentially be achieved. Check or change your ranking in your industry While one may see this as taking a hit in the expected revenue, this is still better than insisting on the original price and still not selling them. To deal with dead inventory, one effective method is to sell them at a discounted price. Dead inventory refers to goods that stay in the warehouse for a long time simply because they are not sold. One big reason why a business has a slow inventory turn is because of so-called dead inventory. You should look at how reliably they can deliver the supplies you need! The best suppliers aren’t always the ones with cheapest supplies, but the ones who can most reliably deliver the supplies, especially when you need them. In fact, your ability to deliver the items that your customers are buying will make or break your business! Therefore, the cost of the supplies offered by your suppliers should not be the sole criteria in selecting them. Increasing sales will result in increasing the speed of your inventory turns. How can you improve your inventory turns?Īs inventory management is an elaborate science and art, you need to consider the following to improve your inventory turns, as listed by Oracle Netsuite: Streamline the supply chain
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