Even the slightest adjustment to the increments of merchandise can have major effects on your cost of goods sold, and thereby on your inventory turns. Management of cost of goods and inventory turns can make the difference in whether your store is profitable or not. Since inventory costs are second only to salaries as a percentage of sales, effective management is crucial to running a profitable business.
Understanding the various increments of merchandise by category and how each will impact the overall cost of goods sold will make all the difference in your business.
Here are a few ways to monitor and manage your inventory.
- Evaluate inventory turnover on a monthly basis.
- Monthly inventory turns should range between .75 to 1 turn/month.
- To calculate inventory turnover: divide the monthly cost of goods sold by the month end inventory.
Increase inventory turn ratio.
- Turnover goals should be between 8 and 12 times per year depending on the store volume. By increasing the turn ratio, cash flow is significantly improved.
Take into consideration the current product inventory quantities on hand.
Monitor bulk oil.
- The cost consequence of ordering an emergency shipment can severely affect your cost of goods.
For more information, read the expanded version here: https://www.ints.com/wp-content/uploads/2013/03/Inventory-Management-0213-.pdf
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