{"id":2746,"date":"2009-08-24T18:50:00","date_gmt":"2009-08-24T18:50:00","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/2009\/08\/24\/subtleties-of-the-inventory-turnover-ratio\/"},"modified":"2021-07-19T06:16:11","modified_gmt":"2021-07-19T10:16:11","slug":"subtleties-of-the-inventory-turnover-ratio","status":"publish","type":"post","link":"https:\/\/www.certitrek.com\/nlpa\/blog\/subtleties-of-the-inventory-turnover-ratio\/","title":{"rendered":"Subtleties of the Inventory Turnover Ratio"},"content":{"rendered":"<p>I hope that you have enjoyed the PurchTips article \u201cBuyers: Know Your Inventory Turnover Ratio!\u201c<\/p>\n<p>While inventory turnover ratio seems like a pretty straightforward calculation, there are some things you need to consider when evaluating it, including:<\/p>\n<ul>\n<li>Inventory turnover ratio must be evaluated alongside stockout statistics. If your inventory turnover is really high, but your number of stockouts is too, that\u2019s not good inventory management. That\u2019s putting your organization at a competitive disadvantage.<\/li>\n<li>A common mistake when calculating the inventory turnover ratio for the entire inventory is to use the price of the inventory when you sell it rather than your cost.<\/li>\n<li>You\u2019ll often see the denominator of the inventory turnover ratio expressed as \u201caverage inventory\u201d in either quantity or monetary figures. In the article, I used an expanded denominator to show you how average inventory is calculated. This helps prevent \u201cguesstimates\u201d that can distort your true inventory turnover ratio.<\/li>\n<li>There is no \u201cone-size-fits-all\u201d ideal inventory turnover ratio. It varies from company to company and from item to item. While you may be able to find benchmarking statistics for your industry from an industry or supply chain trade association, organizations often compare their inventory turnover ratio to past performance and look to increase their inventory turnover ratio from the previous year while reducing the number of stockouts.<\/li>\n<\/ul>\n<p>Inventory turnover ratio is a critical and widely-used metric. Use it wisely and avoid some common mistakes, and you can sell your value to management.<\/p>\n<p><a href=\"https:\/\/www.certitrek.com\/nlpa\/individuals\/membership\/\">Become a member of one of the world\u2019s largest procurement associations today.<\/a><\/p>\n<p><strong>\u00a0<\/strong><\/p>\n<p><strong>Recommended Reading<\/strong><\/p>\n<ul>\n<li><a href=\"https:\/\/www.certitrek.com\/nlpa\/news\/purchasing-articles\/impact-of-inventory\/\">Impact of Inventory<\/a><\/li>\n<li><a href=\"https:\/\/www.certitrek.com\/nlpa\/news\/purchasing-articles\/inventory-puchasing\/\">Inventory Purchasing<\/a><\/li>\n<li><a href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/courses\/profitable-inventory-management-and-control\/\">Profitable Inventory Management and Control<\/a><\/li>\n<li><a href=\"https:\/\/www.certitrek.com\/nlpa\/news\/purchasing-articles\/inventory-turnover-ratio\/\">Inventory Turnover Ratio<\/a><\/li>\n<li><a href=\"https:\/\/www.certitrek.com\/nlpa\/news\/purchasing-articles\/purchasing-and-inventory-management\/\">Purchasing and Inventory Management<\/a><\/li>\n<li><a href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/myth-learning-inventory-management-is\/\">Myth: Learning Inventory Management Is Painful<\/a><\/li>\n<\/ul>\n<p>Visit <strong><a href=\"https:\/\/lms.nextlevelpurchasing.com\/\">NLPA Learning<\/a><\/strong>, the new home to all of our certifications and online courses. The Learning site also includes learning resources, including live and on-demand webinars, publications and reports, articles, templates, white papers, and much more!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>I hope that you have enjoyed the PurchTips article \u201cBuyers: [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":4051,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2746","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.13 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Subtleties of the Inventory Turnover Ratio - Next Level Purchasing Association (NLPA)<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/subtleties-of-the-inventory-turnover-ratio\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Subtleties of the Inventory Turnover Ratio - Next Level Purchasing Association (NLPA)\" \/>\n<meta property=\"og:description\" content=\"I hope that you have enjoyed the PurchTips article \u201cBuyers: [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.certitrek.com\/nlpa\/blog\/subtleties-of-the-inventory-turnover-ratio\/\" \/>\n<meta property=\"og:site_name\" content=\"Next Level Purchasing Association (NLPA)\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/NextLevelPurchasing\/\" \/>\n<meta property=\"article:published_time\" content=\"2009-08-24T18:50:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-07-19T10:16:11+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/11\/nlpa-images-070.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1600\" \/>\n\t<meta property=\"og:image:height\" content=\"900\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Galo Matagay\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:site\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Galo Matagay\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/subtleties-of-the-inventory-turnover-ratio\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/subtleties-of-the-inventory-turnover-ratio\/\"},\"author\":{\"name\":\"Galo Matagay\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa\"},\"headline\":\"Subtleties of the Inventory Turnover Ratio\",\"datePublished\":\"2009-08-24T18:50:00+00:00\",\"dateModified\":\"2021-07-19T10:16:11+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/subtleties-of-the-inventory-turnover-ratio\/\"},\"wordCount\":325,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\"},\"articleSection\":[\"Procurement\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.certitrek.com\/nlpa\/blog\/subtleties-of-the-inventory-turnover-ratio\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/subtleties-of-the-inventory-turnover-ratio\/\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/subtleties-of-the-inventory-turnover-ratio\/\",\"name\":\"Subtleties of the Inventory Turnover Ratio - 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