“Inventory turnover ratio, inventory-to-sales ratio, and sell-through rate are the 3 most useful inventory metrics for retail businesses“–Paul Ebeling
US wholesale inventory accumulation slowed in July, lagging behind sales, and it is now taking wholesalers the shortest time in 7 yrs to clear shelves.
Retail is a money machine where you turn capital into inventory, and inventory into sales. The more times this machine runs, the more profit are generated.
The inventory-to-sales ratio works in the opposite direction to the inventory turnover ratio, so a lower number is better.
Overall, businesses want to keep their inventory-to-sales ratio as low as possible. A low ratio results in higher profit margins and lower operational risks – if something goes wrong, the potential losses are much lower when you are carrying less inventory. But, a practical approach needs to be taken to allow for supply constraints and spikes in demand like now.
Have a prosperous weekend, Keep the Faith!