Turning Around Your Inventory Turnover


Keeping pace with the speed of business necessitates that your inventory is actively measured and correctly managed. If you find yourself staring at warehouse shelves loaded with dusty products, take a moment to ask yourself, what turns over faster?

  • A turtle on its back
  • The line at the DMV
  • Your inventory

If the speed of your inventory is comparable to the DMV, you’ve got a problem. Inventory turnover (aka turns, inventory turns, merchandise turnover) is fundamental to sustained success. As a measure of the number of times inventory is sold or used within a designated period, inventory turnover is computed by dividing the cost of goods sold or net sales by the average inventory. The result provides a clear window into the health of your company.

Infrequent inventory turnover is a significant challenge for many distributors and manufacturers, and analyzing turns can expose issues at both ends of the spectrum. For instance, low turnover rates can indicate potential problems with overstocking or product obsolescence and equate to wasted purchasing dollars. Conversely, high turnover may signify inadequate inventory levels resulting in stock shortages. Either case culminates in revenue shortfalls for your company.

What should you do? First, calculate your entire investment by identifying all related inventory costs. Though computing the value of unsold inventory is a common yet frustrating exercise, it’s important not to overlook ancillary expenses like rent, insurance, property taxes, heating, and maintenance. Each provides further justification of keeping your inventory moving quickly. Knowing the factors impacting your inventory investment, you will be better positioned to evaluate and implement the correct management tools.

With increased accuracy and productivity, the turnkey ERP-ONE business software from Distribution One delivers the complete set of tools companies require to effectively manage their entire process: Inventory Management, Order Entry, CRM, General Ledger, Purchasing, and Reporting. Founded in 1996, Distribution One helps more than 8000 users in North America and Europe run their businesses profitably. Built by experts in supply chain management, technology, accounting, sales, and everything in between, ERPONE tracks your inventory and can report when you have stock shortages or surpluses in both single and multiple warehouse environments.

Supporting push and pull methods of branch replenishment, ERP-ONE allows inventory valuation with multiple costing options and offers unique stocking level settings per warehouse and item: EOQ (Economic Order Quantity), Classifications, Min/Max, and Net Usage History to reflect true customer demand. The interconnected ERP-ONE applications support suggested buy options for seasonal determination along with automatic lead time calculations.

Serialized inventory/lots provide individual product tracking from purchase to sale in instances of warranty, recall, or safety issues. ERP-ONE supplies notifications for minimum freight/order requirements and usage options based on Transfers, Work Orders, Secondary Process, and VMI (Vendor Managed Inventory). Additionally, ERPONE affords companies the ability to broaden inventory marketability through Kitting/Assembly functionality.

Combined with mobile accessibility, ERP-ONE helps you achieve greater control over your entire warehousing process. You will drive faster inventory turns while increasing productivity, streamlining internal processes, and strengthening your bottom line.