What does it mean? Inventory Turnover Analysis

[Former Member]

Hi Expert,

I'm new to inventory management...and need your knowledge.

My question is:

1. [Days of Inventory] = -66.650

- What does this number tell me about?

- Is there any gauge for good/bad?

2. [Inventory Turnover] = -0.465

- What does this number tell me about?

- Is there any gauge for good/bad?

Regards,

Sokkorn

[iftikharabbasi · Accepted solution]

The meaning of inventory turnover, means the number of days required inventory to be turned over into cash.

i.e. when its inventory (in stock) the cash of yours is bound/stuck there in inventory, once the inventory is sold out/dispatched the cash is due/receivable i.e. turned into cash. So inventory turnover shows the number of days it took for an inventory to be back to cash/liquidated position.

In my opinion, you need to see other different parameters as well before arriving at a conclusion.

Hope this helps.

Regards

Iftikhar

[Former Member · Accepted solution]

Hi Iftikhar,

Thank you for your comments...

By the way, when run standard report (9.2 PL03) "Inventory Turnover Analysis", I notice that all number are negative. Is this normal?

Regards,

Sokkorn

[Johan_H · Accepted solution]

Hi Sokkorn,

That is just because the sales data in the demo company database is very old. Just look at the Last Receipt Date column. This date tells you when the item's stock was last received into inventory. As you can see, it was many years ago, so any stock has been sitting in the warehouse for at least 5 years.

Regards,

Johan

[Former Member · Accepted solution]

Hi Johan,

Thank you for your comments.

I'm very new with inventory function. Can you validate my interpret for below report?

For the period from 01/01/2009 to 12/31/2009

[Opening Inventory] = 102 --> This mean that on 01/01/2009 we have 102 units in stock

[Closing Inventory] = 222 --> This mean that on 12/31/2009 we have 222 units in stock (on hand)

[Period Goods Issue Qty] = -250 --> This mean we have 250 units moved out from stock during report period

[Days of Inventory] = -236.52 --> This mean that the item sleep in stock for 236.52 days

[Inventory Turnover] = -1.543 --> ???

With warn regards,

Sokkorn

[Johan_H · Accepted solution]

As Iftikhar explained the [Inventory Turnover] = "the number of days it took for an inventory to be back to cash/liquidated position"

Think of it this way: let's say you buy 100 pcs of item A every single day of the year, and you also sell 100 pcs every single day of the year. This would give you a turnover of 365, i.e. you turn the stock of item A over once a day.

So because in this case the demo data is very old, the stock has been sitting on the shelf for such a long time, that the inventory turnover has become negative.

[Former Member · Accepted solution]

More clearer Johan...

As you mentioned, demo database is very old. Is there any way to manipulate data into current date? This way I can get big picture how inventory work.

Regards,

Sokkorn

[Johan_H · Accepted solution]

Hi Sokkorn,

There are three ways to get more recent data into the report:

1. Use (a copy of) your productive database (if you have one), and run the report there. This is the optimal solution.
2. Manually add some transactions (purchase and sales) to one or two items in the demo database, preferably back date these transactions. This should be enough to see the working principles of the report.
3. Use Excel and the Data Transfer Workbench to generate a lot of test data.

Regards,

Johan

[Former Member · Accepted solution]

Thank you Johan. I'll try it.

Regards,

Sokkorn

[former_member1135370]

Can someone provide the formula for the Inventory Turnover Analysis Report - in specific the column that has the Inventory turnover? What does it mean that I have 1.16 Inventory Turnover?

Thanks,

[kothandaraman_nagarajan]

Hi,

If inventory turn over is positive and more, then your inventory control is good and you are making money.

Regards,

Nagarajan

[Former Member]

Hi Nagarajan,

Thank you for your comments...

By the way, when run standard report (9.2 PL03) "Inventory Turnover Analysis", I notice that all number are negative. Is this normal?

Regards,

Sokkorn