![]() ![]() Such a relationship can mean that any piece of unsold merchandise can be returned to the wholesaler, for full credit, within a mutually agreed-upon period. In some industries, companies can work out arrangements with suppliers to limit their vulnerability to slow-selling inventories. However, targets may vary based on the industry profile. Given the universality of this KPI, it allows for easy integration of benchmarking methods. To calculate it, divide the cost of goods sold (COGS) by the average inventory value. Using KPIs to measure and assess stock turns. Inventory turnover ratio (also known as inventory turnover rate, stock turn, or inventory turn) is the number of times a company sells and replenishes its stock over a specific period (usually one year).Evaluating the costs associated with slow-moving inventory.Refining service level agreements with slow-moving stock.Identifying and cataloging inventory items with low turnover rates Identifying and cataloging inventory items with low turnover rates Refining service level agreements with slow-moving stock Evaluating the costs associated with slow-moving inventory Using KPIs to measure and assess stock turns.Some recommendations on managing this indicator include: High values of % Slow moving stock also reflect slow sales and potential financial trouble. Slow-moving inventory is defined by overstocked items, low turnover rates, and infrequent shipment of merchandise.Īn increased amount of slow-moving inventory indicates that the company is not very efficient in managing its inventory. ![]() As a result, the emphasis should be on selling them, even with lower prices.Īs a last resort, if the slow-moving items cannot be sold and they are still in good condition, you can donate them to charity and in the process, obtain tax advantages, based on each local, regional or national legislation, if this is applicable.Įffective inventory management ensures that % Slow moving stock is clearly identified and dealt with. However, if they pile up for an extended period of time, without producing profit, they become worthless. Slow-moving stock can result in obsolete stock and generate financial losses. ![]() To assess a company’s inventory management capability. The defined number of days is less than the ones established for obsolete items. You might wonder why the equation doesn’t use ending inventory. Measures the percentage of stock that has not moved in the defined number of days, out of the overall stock. In order to round up the inventory turnover ratio, we have to divide the costs of goods sold, for a period of our choice, by the average inventory for the period we have chosen. ![]()
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