Each company has its own characteristics, both in terms of product type and inventory planning conditions. To figure out the best way to optimize these processes for you, and choose the right tools for analysis, you need to consider all the causes of problems.
First, it is important to know your inventory turnover and how to calculate it. To do this, multiply the gross profit by turnover. A large number of months for a particular product indicates slow turnover. This means that this product takes up a lot of space physically, slows down the turnover of capital, and, as a result, reduces the percentage of possible profit. This, in turn, may be caused by a general decrease in market activity, the emergence of competitors with a more aggressive advertising campaign, or improper planning of purchases and sales, etc.
Often, improper inventory management can lead to either a complete absence of goods in the warehouse, or to slow-moving goods. Therefore, we do not recommend saving on specialists who deal with these issues, because financial losses always exceed the amount of remuneration for this work.
Proper management will reduce the time goods are stored in the warehouse. Timely replenishment of stocks is a sign of proper planning and inventory management.