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To find inventory turn over in WHS
It can be derived from calculating the ratio of " cost of goods sold for certain period by the average of inventory on same duration".
Inventory turnover in warehouse operations calculated as below.
QTY WISE= TOTAL DISPATCHED UNITS / AVERAGE INVENTORY QTY
VALUE WISE= TOTAL COST OF DELIVERED UNITS / AVERAGE INVENTORY VALUE
TO FIND AVERAGE INVENTORY.
STARTING INVENTORY + ENDING INVENTORY / 2
Does Average Inventory = Inventory Turnover ??
In aperfectly planned set up and over a certain period it should. However, in the real world, there is always a certain acceptable norm of deviation. Also in emergency situations, there is always a large deviation at a certain point in the year even when you try to close the financial year, where one exceeds the other. The better the plan the closer we are to achieve the equation.
As how to calculate the inventory turnover, is by calculatin total deliveries/consumables/sold stock over the average stock inventory during a certain period of time, normally a year.
Inventory turnover is a way of measuring how many times a business sells its stock of inventory in a given time period. Businesses use inventory turnover to assess competitiveness, project profits, and generally figure out how well they are doing in their industry. Unlike employee turnover, a high inventory turnover is generally seen as a good thing because this means that goods are sold relatively quickly before they have a chance to deteriorate. Generally, inventory turnover is calculated with the formula Turnover = Cost of Goods Sold (COGS)/Average Inventory.
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