Inventory Turnover Ratio (ITR) measures how efficiently a business manages its stock. Calculated as the cost of goods sold divided by average inventory, this ratio indicates how many times a company sells and replaces inventory over a given period. A high ITR signals efficiency, while a low ratio suggests overstocking or sluggish sales.
Achieving optimal inventory turnover is crucial for maintaining a healthy cash flow. Excess inventory ties up capital and increases storage costs, whereas understocking can result in lost sales and dissatisfied customers.
ERP systems play a pivotal role in inventory optimization by providing real-time visibility into stock levels, sales trends, and demand forecasts. Businesses can use these insights to maintain optimal stock levels, reduce waste, and improve customer satisfaction. For example, SAP Business One’s inventory management module offers tools to track stock movements, set reorder points, and automate replenishment.
Moreover, an optimized ITR enables better supplier negotiations. With accurate data on sales velocity, businesses can negotiate bulk discounts or flexible payment terms, boosting profitability.
Ultimately, monitoring and improving ITR is a cornerstone of effective supply chain management, and leveraging ERP solutions ensures long-term success.
Using PSG Grant for our SAP Solutions:
https://www.gobusiness.gov.sg/browse-all-solutions-erp-and-standalone-solutions/accting-mgmt–inventory-mgmt-and-sales-mgmt-system
Recent Comments