The Financial Metrics in Measuring a Well-Balanced Inventory – Part 1
Summary
Inventory planning uses a wide range of variables and metrics, which generally include: · Other analyses like Pilferage and spoilage, Quality-Percentage Defect, etc. · Financial perspective metrics - Insurance, Gross margin Return on Investment (GMROI), Average Cost per Order, Lost Sales Analysis, etc. The cost of carrying excess and obsolete stock, as well as not having sufficient saleable inventory to meet demand is enormously high. According to industry research, companies that forecast, plan, and optimize more accurately generally have 15% less inventory, 17% better "perfect order" ratings, and 35% shorter cash-to-cash cycle times. · (the Avg Monthly Usage is typically the yearly forecast divided by12) You can spend as much as you like or can afford or leverage on credit or loans for your inventory.