Often we wonder how to improve our turnover rates, which are the true mark of inventory management success. Having the stock on hand to easily fill any orders made by customers is the ideal, because inventory is only worthwhile if it is available when it is needed, so that the goal of converting it back into capital as soon — and as often — as possible can be met.
Inventory turnover over a specific period of time is calculated by the following formula.
Inventory turnover = Cost of Goods Sold / Average Inventory
Inventory turnover ratios tell you how many times your inventory has sold through. To calculate, take the total cost of goods sold for the year and then divide this by the average inventory. First, choose a period of time to examine. The most practical period for small to medium-sized retailers is one year. Average inventory can quickly be calculated by adding your inventory at the beginning of the period to your inventory at the end of the period, then dividing by 2.
With SIMMS 2013 Inventory Management software you can track the items that sell, as well as the ones that do not, and make quick improvements to your bottom line.
There are several good habits you can begin. Awareness of your inventory, its categories and which items move the best is crucial. Refer to your business plan regularly and build in a policy of stopping to think before you buy items in lot quantities; ordering smaller groups is more tedious, but it also protects your capital against over-extension. Promotions and special processes will help you move your over-stocked goods.
Contact KCSI today to learn more about the advantages that SIMMS can bring to your business.