Examining Finished Goods Inventory Turns

With supply chains (and the global economy more broadly) upended by COVID-19 in the first quarter of 2020, carefully managing inventory turnover, including understanding the benefits and risks, is vital. It has also become more difficult than ever. Sudden spikes in demand for some products are driving a bullwhip effect that distorts demand data as impacts move along the supply chain, while precipitous declines in demand for other products (like gasoline) are driving slower production or even bringing it to a standstill. How quickly should organizations be turning their inventory?

To bring clarity to the chaos, this article provides cross-industry benchmarks for finished goods inventory turns, the most popular measure for tracking finished inventory. Finished goods inventory turns is a measure that every supply chain leader ought to track now and even after the crisis has abated to ensure that their organization isn’t holding too much stagnant inventory on-hand or is unable to provide enough inventory to fulfill customer orders.