An increase in the inventory turnover rate for a supply chain typically would indicate that there has been a reduction in:
An increase in the inventory turnover rate for a supply chain typically would indicate that there has been a reduction in:
An increase in the inventory turnover rate typically indicates that the total supply chain inventory has decreased. This is because inventory turnover rate is calculated by dividing the cost of goods sold by the average inventory during a period. A higher turnover rate means that inventory is being sold and replaced more frequently, suggesting a reduction in the amount of inventory being held in the supply chain.
For example: Yr 1 inventory 100, revenues 1000, so turnover is 10. Yr 2 inventory 100, revenues 2000, so turnover is 20. Inventory qty remains same, but turnover goes up.
I agree but I think they get you on the wording here "typically"
Not true. The inventory qty can remain the same or even increase and the turnover go up if the revenues during the period increase at a proportonately higher rate.
in simple, if there is more sales, then the inventory turn over ratio is high as these are a velocity parts and you can set a low reorder quantity as the volume churns out.