Inventory Turnover Essay

Inventory turnover Viviana Palacios MGT521 Professor Edward Dempsey July 26, 2010 The investment of a company’s success depends on their inventory. Inventory turnover is a ratio showing how many times a company’s inventory is sold and replaced over the period of time. The risk of Kudler Fine Foods was to make sure that their perished goods had a fast inventory turnover rate. The importance of high inventory turnover was expected to protect the brand’s integrity and vision of keeping all goods fresh. Inventory turnover is considered a key measure of management efficiency.

It is a measure of how often, during a course of a year, a company sells and replaces its inventory of component parts, materials and final products. As a general rule, the higher the inventory turnover rate the better it’s for the business. For Kudler Fine Foods the perished goods used in their stores had a high inventory turnover. Management makes sure to monitor all products, to make sure that all unsalable products were pulled from the shelves. The problem affecting kundler foods was that Kathy was the only appoint person to order their inventory, in her absence the company can suffered from managing their inventory.

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In the vision of keeping all goods fresh, inventory accounting can play a big factor in the company’s success. Inventory is a current asset on the balance sheet, therefore inventory’s valuation can directly affect kundler foods total current asset and in general their total asset balances. A company’s inventory valuation can cause a ripple effect throughout its financial picture. Inventory management is necessary for owners like Kathy to maintain a stocking service for quick turnaround to help ensure total customer satisfaction. The fill rate of an item develops a well managed inventory list.

A well maintained stock list must be kept to avoid shortages of frequently used items. One of the problems affecting Kudler Fine Foods was that of reliable suppliers, they ran into the obstacle of these suppliers showing up limited. Opportunities for this business were that providing training to staff members to make sure that inventory was always replenish. The transition in ordering policies and formalized inventory record file was difficult for this company. The needs of implementing inventory analysis by an operation manager can facilitate a better inventory record file.

In the vision of Kudler Fine Foods, their operations only appointed Kathy the owner in charge in making orders for the business. The lack of untrained employees in performing such duties would affect inventory management. This can be a daunting prospect in this company, the lack of employees with appropriate data management backgrounds. When employees are better trained in assisting the owner in keeping a well maintained stock list with the knowledge of inventory analysis, the business can sustained high productivity.

The financial benefit must be high enough to justify not only the cash expenditures for stocked items, but also the time and money spends managing the inventory. In addition it is for employee time that they are offered an opportunity to learn how to manage their inventory. This high productivity can improve quality and a greater flexibility in delivery responsiveness. The benefits of keeping significant qualities of goods in stock are always clear in that this can produce and repeat satisfied customers.

In Kudler Fine Foods business they can often face financial and logistic limitations when erecting their inventory systems. Well balance inventories play a major part at the point of sale while procedures typically play a part on the company’s inventory organization. A breakdown and a review of inventory classification are recommended for the company to safe money in their products. One of the main focuses Kudler Fine foods needs is to review transportation; this is measure by what they can keep in their warehouse. This can protect the consumption on perished goods.

Employees can undertake periodic reviews to ensure that inventory is held at the level that best meets customer needs. This can devise a workable system when a safety inventory stock can be reached and distributed on a timely basis. The analysis of this can ensure that the company’s sees an unexpected rise in product demands. In addition Kudler Fine Foods can analyze and calculate the impact of seasonal inventory fluctuations and incorporate such into inventory management strategies. Employees should be trained to appropriate organize a list in seasonal selling products.

Inventory analysis on seasonal products can prevent the products to be on the shelves for less period of time. In addition another inventory strategic that can beneficial and can improve inventory turnover is to create a company’s forecasting mechanism and the volatility of the marketplace. Both forecasting and volatility of the market can have an impact on inventory decisions. Furthermore, in a company’s inventory security, helping establish and regular reviews can ensure that these goods reached excellent status.

During the operations of a successful inventory analysis , identifying and managing excess or obsolete inventory can determine why these goods are being asked in high demands. Inventory management decisions that can help Kudler Fine Foods success is the reorganization that inventory is deeply interrelated with employee training. The understanding of inventory analysis can help this business to improve their daily operations. As well management should provide employees with training to enhance their knowledge in being involved in taking part in business operations.

Additional managers such as an operational manager should be added to the construction of this organization. An inventory system should be regularly reviewed from top to bottom as an essential part of the minimal strategic and business process. When reviewing their inventory process unsalable stock inventory should be considered to prevent future ordering. The lack of adequate stock on hand and disposal of perished goods can affect the balance sheet. This can result in the total asset versus the liabilities of the business. The loss can produce the business to have a greater profit loss, into their net income.

In conclusion, inventory management systems should be regularly reviewed. The high turnover can affect the business. In a general scale those perished goods can result in a long term revenue loss, finally inventory analysis and product sell-thru is the reasons to figure out a company’s success. In Kudler Fine Foods the relationship between employee training and product sell-thru is an opportunity they can explore when strengthen their daily business operations. References inventory turnover. Bloomsbury Business Library – Business & Management Dictionary, 2007


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