This measure calculates raw material inventory turns by dividing cost of goods sold (COGS) for the year by the average value of month-end total inventory (raw materials, work-in-process, and final goods) for the most recently completed fiscal year. COGS represents the cost of purchasing raw materials and manufacturing finished products. It is part of a set of Process Efficiency measures that help companies optimize the performance of their "produce product" process by minimizing waste and refining resource consumption.
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Raw material inventory turn rate
Process efficiency represents how well a process converts its inputs into outputs. A process that converts 100% of the inputs into outputs without waste is more efficient than one that converts a similar amount of inputs into fewer outputs.