Hold yourself to your own historical numbers and you’ll be able to make progress. That’s why it’s always important to benchmark your turnover rate. If you’re not getting rid of inventory, it’s taking up space and tying up cash.īut “good” means different things in different industries. Which is, ultimately, the point of any manufacturing and supply business.Īlternatively, low inventory turnover signals poor purchasing, sales, and marketing strategies. It speaks to their ability to turn raw materials inventory into finished goods inventory and offload them. High inventory turnover means a company is purchasing and selling inventory optimally. Most high-performing businesses tend to have inventory turnover from 5 to 10. Accepted industry standards are that inventory turnover rates below 5 aren’t ideal. That means that product is sold and replaced 3 times over the period analyzed. Take, for example, a company with a turnover for a specific SKU number at 3. You’ll need to calculate your cost of goods sold and average inventory formula to calculate your inventory turnover. Inventory turnover ratio measures how many times a company has sold and replaced its inventory over a specific time frame. Sales Inventory KPIs Inventory Turnover Ratio In each section you can click to a post with much more detailed information about each inventory KPI. Here we’ll look at six crucial inventory management KPIs and exactly what they mean. They give you visibility into performance and a measuring stick to track success. KPI stands for “key performance indicator.”Īn inventory management KPI is a number or metric companies track to gauge the efficiency of their inventory management. If you’re not treating it with care, what are you treating with care?Ī lot of people will ask that question about your business if your inventory KPIs are lackluster. Because your inventory is one of your most valuable assets.
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