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What does it mean to be World Class related to Inventory Turns?

inventory turnsIn the past I have always strived for a percentage improvement over the prior year or prior rolling three years.  It's difficult to determine how much improvement is good enough other than ones own past experience.  Does anyone know of any publications or other resources that I can reference to determine what manufacturing organizations experience and strive for regarding inventory turns (i.e. What does it mean to be World Class related to inventory turns?).  Manufacturing category or sector specific would obviously be more useful to narrow the relevance of the information.  Any advice or direction would be appreciated. 

Answers

Topic Expert
Bob Scarborough
Title: CEO
Company: Tensoft, Inc.
(CEO, Tensoft, Inc.) |

One place you can look for manufacturing or inventory management data on broad terms is APICS (www.apics.org) - the association for operations management. Your hard core materials management and planning types often have APICS certifications. Beyond that you can look to trade groups specific to your industry.

Inventory turns are one measure of appropriate investment strategy and operations execution - along with things like average days sales on hand, gross margin, lost sales analysis, and inventory cost reduction strategy.

Bob Scarborough
www.tensoft.com

Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

Good question, Anonymous.

Check out this free report here on Proformative, with a good focus on how ERP can transform inventory management:

"Nucleus Research Report — The ROI of Cloud ERP for SMBs:"
https://www.proformative.com/whitepapers/nucleus-research-report-roi-cloud-erp-smbs

Enjoy!

Best... Sarah

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Wouldn't the use of MRP or MRPII improve your turns by fine tuning inventory and purchasing to match forecasts & sales?

Anonymous
(Operations Controller) |

Thanks for the comments. While doing some additional research I was able to locate a nice resource that I thought I would share with the group. It is an annual publication that provides 50 performance indicators and covers 200 industries and 5.8 million US and International corporations. The title is "Almanac of Business and Industrial Financial Ratios" by Leo Troy, Ph.D. and is published by CCH (CCHGroup.com).

Topic Expert
Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

I would look at 2 versions:
1. historic inventory turns
2. projected inventory turns: today's inventory related to future sales (this helps determine if sales forecasting is also accurate and whether you need to take action now to change what will happen, rather than wait for historic measurement of what happen.
What also counts is the trend and whether you have taken any decisions to stockpile or liquidate inventories for other reasons, whether a product run out or launch is about to happen,

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