Inventory turnover can determine whether a business is performing well or worse. To further define it, it is the rate of how fast a company buys and sells its products to its customers. It indicates an unfavorable scenario when a business has a low inventory turnover. It might mean that it has poor management that is prone to making unsound decisions, unsatisfactory sales approach of the Sales people, or having too many obsolete goods in the inventory list.
Based on recent statistics, here are the industries with the highest inventory turnover:
The financial sector comes first as the industry with the highest turnover because these companies replenish their inventory almost 50 times annually. Financial products are also intangible, and this contributes to the reason for having the highest inventory turnover.
As mentioned before, a high turnover is a good indicator that the company is operating efficiently and has strong yearly sales. Investors are persuaded that companies in this sector have fewer risks and can become prospects for future investment.
Extremely high turnover is kind of dangerous. It might mean the inability to meet the demands of your customers due to a shortage of products. As a general rule, a good inventory turnover lies between 5 and 10. Most industries are recommended to keep this ratio to ensure that they have enough inventory on hand.
In the past, spreadsheets were used to monitor the inventory turnover ratio of industries, but there are several software that has been developed recently to make tracking easier and more convenient, which allows you to know your business better.