Back to Blog
Inventory turnover rate calculator7/23/2023 Why does inventory turnover matter to your ecommerce business? ![]() That prioritization could affect your spending on active and planned marketing campaigns, while your customer service team receives fewer complaints when high-turnover products are readily available. Slow-moving inventory, meanwhile, can be discounted to make room for more profitable items. This metric helps you make decisions about inventory levels and drive other business decisions related to warehouses, fulfillment, marketing and customer service.įor example, products with high inventory turnover ratios should be optimally positioned in warehouses for quick fulfillment. In essence, inventory turnover measures how fast you sell inventory during a given period. While you can measure inventory movement over a month or quarter, many inventory turnover calculations rely on yearly inventory data. 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. ![]() It does not store any personal data.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. The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. The cookie is used to store the user consent for the cookies in the category "Performance". This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other. The cookies is used to store the user consent for the cookies in the category "Necessary". The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional". The cookie is used to store the user consent for the cookies in the category "Analytics". These cookies ensure basic functionalities and security features of the website, anonymously. Necessary cookies are absolutely essential for the website to function properly. ![]() When this is the case for the business you’re analyzing, you’ll likely notice a higher level of accompanying debt, and a lower level of cash-on-hand. ![]() This can often result in lost sales, as customers look elsewhere to have their orders filled in a timelier manner. Sometimes when a company’s inventory ratio is attractively high, for example, it can simply mean that the firm doesn’t have the financial wherewithal to keep its merchandise consistently stocked at a realistic level. This indicates that the overall management of the flow of goods through the business is relatively streamlined, and that the company doesn’t have a lot of stagnant and unavailable funds sitting around in the form of unsold merchandise.īut an elevated turnover ratio is not necessarily a good thing in every situation, and you should always investigate your results in combination with other factors, regardless of the outcome. When the ratio value is high, it means that a company’s inventory is being bought or manufactured, and sold off, quickly and efficiently. So what is a good inventory turnover ratio?Ī higher inventory ratio value is usually viewed as a more positive outcome.
0 Comments
Read More
Leave a Reply. |