Inventory turnover ratio is a crucial metric in supply chain management, especially for purchasing agent businesses like Dupbuy. This article explores how to calculate inventory turnover ratio in spreadsheets and leverage it for strategic stock management adjustments.
The inventory turnover ratio measures how often a company sells and replaces its inventory during a period. The basic formula is:
Inventory Turnover Ratio = Cost of Goods Sold (COGS) / Average Inventory
In Column F: =(C2+D2)/2
In Column G: =E2/F2
Understanding the relationship between these metrics is essential for inventory optimization:
| Relationship | Analysis Approach |
|---|---|
| Turnover vs. Sales Trends | Compare when spikes in sales correlate with higher turnover. Identify poorly performing products |
| Turnover vs. Purchase Patterns | Analyze if current purchase frequency aligns with desired turnover rates |
| Categorical Differences | Segment by product categories to optimize differently for fast/slow movers |
Key performance indicators KPIs) to monitor:
Actionable changes for efficient inventory management:
○ Diversify sources:
○ Optimize reorder points:
○ Consider bulk deals:
○ Implement promotions:
○ Reduce order quantities:
○ Evaluate termination:
Version control your inventory management spreadsheet to track changes and improvements over time. Document all strategic adjustments and their outcomes for reference in future cycles.
