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Manufacturing Inventory Turnover Data |
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How Much Is Enough? |
Benchmarking & MonitoringFor most manufacturers inventory is one of the top two items on the balance sheet. It often requires more capital than the facilities and equipment. Inventory is also a measure of overall efficacy since most manufacturing problems increase inventory. (See the Role of Inventory) One metric for evaluating the amount of your inventory is Inventory Turnover. Turnover measures the efficiency of inventory usage and compensates for differences in sales volume. This metric is simple, intuitive and easy to calculate. Calculating TurnoverThis calculation uses actual sales dollars from the P&L Statement and period-end inventory value from the balance sheet. It is also know as the Sales/Inventory Ratio. There are many variations of this calculation, for example:
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![]() ![]() Purchase Detailed Industry Data
![]() ![]() Inventory DistributionThe proportions of inventory in Raw Materials, work-In-Process (WIP) and finished Goods can indicate problems to be addressed in various areas. Higher than normal proportions in Raw Materials indicates supply chain opportunities. Causes may include long lead times, transportation, quantity discounts, supplier selection, poor scheduling or poor inventory accuracy. Higher than normal proportions in WIP indicates problems on the manufacturing floor. Examples of causes might be poor workflow, functional layouts, scheduling or quality problems. Abnormally high Finished Goods inventories can indicate a disconnect between manufacturing output and customer's needs. Causes of the disconnect might be batching, long setups, long throughput times or erratic demand. The chart below shows how inventory is distributed, on average, within major industry groups. More detailed information on 4, 5 and 6 digit industry groups is available in the spreadsheet. ![]() ![]() Manufacturing ProductivitySales per Employee is one of many metrics for benchmarking productivity. When comparing across firms, even within the same industry group, most productivity measures are very approximate and sales-per-employee is no exception. This particular study focused on inventory rather than productivity. However, we have included this particular metric in our database because it was convenient and may be useful to some users. |
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