Be smart when it comes to inventory to sales ratio

Keep track of how inventory is doing.

Keep track of how inventory is doing.

Smart inventory management focuses a lot on having the right products to meet consumer demand. However, forecasting is a critical component to make sure you’re not overwhelming your warehouse with products that will ultimately end up not moving.

It’s important to stay up on your inventory to sales ratio, as it could be an indicator for how smart you’re being in the warehouse, according to Logistics Management. If you’re bringing in lots of inventory with your material handling equipment but not seeing a lot move out, or continue to stockpile, you may be faced with a sunk cost that you can’t get back due to unmovable inventory. Too much of this could eventually hurt your bottom line. Having higher inventory can have negative consequences to the overall economy, if too many businesses are struggling, according to the news source.

Fortune reports that not knowing a company’s inventory to sales ratio can put it in jeopardy because it will leave a company unable to operate its finances efficiently. The figure is calculated using the net sales and dividing them by inventory. However, the ideal rate can vary by industry, so it’s important for every warehouse manager to research and forecast appropriately.

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