Why measure After creating a sales forecast by product category for November and December, you need to decide how much inventory to purchase to meet your sales goals. When planning, you should always know how much capital is tied up in inventory and focus on the ideal amount of inventory to fuel your sales.
After determining your sales goals for this season, you need to look at some purchasing and inventory planning metrics:
Stock rotation Why measure
Inventory turnover is a statistical value that represents the time it takes mobile database to replenish, sell, and replace products within a predetermined period. To calculate your inventory turnover rate, use this formula:
Inventory turnover helps you determine your optimal inventory levels. If this rate is too low, it means you’re not selling your stock quickly enough, with the inherent risk of any slow-moving, aging inventory.
Forecasting stock levels
Conversely, if your inventory turnover is too fast (if you sell an item more than the power of the pop-up store four times a year), it means you are not buying enough stock and cannot meet customer demand.
How to improve inventory turnover
It depends on whether your rate is too low or too high. If it’s low, you Why measure should avoid overordering. If it’s too high, you have the exact opposite problem. To solve both, you can implement reorder points in your POS system. These will ensure your inventory remains at the most optimal level for your business.
Concretely this gives…
After digging a little deeper, you see that you sell €15,000 worth of shoes per month. Shoes account for 50% of your monthly sales and are your best-selling product category by far. You need to invest €15,000 of your inventory budget in shoes to meet customer demand.
To see how quickly you typically sell your shoes, calculate your turnover rate. You aero leads sold €180,000 worth of shoes in 2017. Your year-end inventory was €9,000, and you have an annual cost of goods sold of €84,000.
84,000 € / 9,000 € = 9.4
(1 / 9.4) x 365 = 38 days
This information lets you know that when you invest $15,000 of your inventory budget into shoes, you have enough inventory to last 38 days.