That is a measure that is good as a disincetive/counter-measure to simply pushing mid level BOM/SKU production that increases cost while it drains the inventory from the lower level being measured. In a multilevel BOM-SKU environment, you must extrapolate the true qty that, many BOM levels up, become part of COGS (and then use that qty x Ave cost at the lower level SKU level to determine SKU turns). Qty based turns is OK as it equates to use of Average cost over the period measured.įor zero cost items it is the only real choice (and only benefit of measuring zero cost items is to drive you to minimize risk of getting stuck with out of rev or obsolete inventory to deal with - along with reduced storage space.)įor most who haven't achieved a high velocity LEAN environment (where WIP moves through a well defined and highly controlled conversion process & only raw materials are SKUs), it gets trickier to measure turns for single SKUs. Good measure for a return on (inventory) asset investment when measured in gross for all sales & inventory although public companies (and analysts who assess them) don't like to detail costs directly so they as often use Net Sales / Average Inventory.Īll get sketchy when trying to assess performance of SKUs at an individual level unless you are LEAN as can be and have single level (sold item to SKU) BOMs. Classic turns is COGS ($'s) over the period divided by average inventory value ($'s).
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