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So, first let’s take a look at this magic inventory turnover formula that will help you streamline your business and achieve best results. At the same time, good inventory turnover ratio means that you are not overselling your projections, which could lead to inventory shortages. By evaluating inventory turnover closely, you can point out possible areas of improvement for your overall business model.Ī good inventory turnover ratio ensures that you do not have redundant inventory, meaning inventory that is not sold and just occupies your valuable storage space. It is one of the most important aspects of inventory management that shows how efficiently you manage your inventory. What does inventory turnover mean for your business?Īctually, it means quite a lot.
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For better inventory turnover, the company should sell more than it purchases to avoid overhead costs for storage. Basically, the inventory turnover ratio depends on the amount of purchases and sales. It is a figure that defines how many times your inventory is sold or replaced within a specific time period, such as a quarter or a year. To find out more about innovations in Machine Learning, reach out to us.First, it’s important to understand what inventory turnover is in plain terms. With the advent of machine-learning, new tools are in development to help you understand and forecast inventory demand.These tools can help you identify proper reorder points and forecast inventory demand, helping you to predict what to order and when to order it: Implement advanced reporting and analytics tools Getting rid of obsolete inventory frees up stockroom space to stock needed items (see #2).ĥ.The sooner inventory is identified as slow-moving or obsolete, the better the chance to get full reimbursement. Make arrangements with suppliers to return slow-moving, or obsolete inventory and try to get reimbursed as close to the full value as possible.You’ll need to start with analytics to identify slow-moving inventory on time (i.e., not after years of non-use). You can read more about this in our article, How to Save Money by Reducing Slow Moving Parts. Identify and get rid of obsolete inventory Depending on your relationship, it may be possible to negotiate a more urgent replenishment with the salesperson at the front line at the dealership. If you do run low on stock (i.e., you fall below your min/max level), contact your preferred supplier. If it takes the supplier a week to deliver an order, you may need to order in larger quantities and may want to order more since you may not know today what you will need in three days. When placing the order, make sure you have a better idea of what inventory you need to order. For example, if the supplier offers same-day delivery, you can order in the morning for work to be done in the afternoon. By reducing delivery times, you can order in smaller quantities on a more frequent basis. Work with suppliers to reduce delivery times so items can be purchased more frequently as needed. Search your Part Stock History – A maintenance system should show you historical examples of the part so you can learn from the past and strategize for similar events in the future.If there is an inventory site with the part you require, the most time-saving an inexpensive way to replenish a low part stock may be to ship the part from another inventory. Replenish Parts – Understand the most economical way to replenish a dwindling parts supply.
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Setup a Reorder Point – Many maintenance systems can help you to identify when you need to order more.Define Safety Stock Level – The recommended quantity that should be kept on hand at all times.Define your Maximum Stock Levels -The maximum on-hand quantity.Define your Minimum Stock – The minimum on-hand quantity (reorder if you fall below this value).There are a few metrics you can begin monitoring to ensure you are accomplishing this: Set up reports that validate that you are purchasing the correct inventory in the correct quantity, so you stock what is needed and nothing more or less. Ensure you always have items on hand that are needed Plus, real-time insight into your inventory helps you to make purchasing decisions that are proactive rather than reactive. If your inventory is up-to-date, you can better understand your parts on-hand. You can accomplish this by running regular (and accurate) physical inventory counts. Start with an accurate, up-to-date count of inventory items Here are a few tips on how to achieve a healthy inventory turn rate: 1. The amount of inventory purchased should be your usage. It is important to carefully streamline your inventory because too much or too little can affect your bottom line. Inventory control is crucial to any warehouse, retailer, or maintenance shop.