Please tell me what is the industry average is for inventory turn in the basic categories such as, Foodservice, Beer/Wine,Cigarettes, Grocery,Tobacco,Soda. We seem to be keeping to much inventory on hand. We have 15 stores and keep a very tight control on inventory.
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Apart from monitoring product movement, gross margin dollars and gross margin percentages, managing inventory levels can make or break a category. There are several key metrics to consider with regard to the management of inventory and overall working capital:
1. Inventory Turns (Inventory Turnover): The number of times that a company's inventory cycles or turns over per year.
2. A frequently used method is to divide the Annual Cost of Sales by the Average Inventory Level. Example: Cost of Sales = $6,000,000. Average Inventory = $1,000,000. $6,000,000 / $1,000,000 = 6 Inventory Turns
3. Gross Margin Return on Inventory Investment (GMROI): This measure of inventory productivity expresses the relationship between your total sales, the gross profit margin you earn on those sales, and the number of dollars you invest in inventory. GMROI is expressed as a percentage or a dollar multiple, telling you how many times you've gotten your original inventory investment back during one year. The formula for finding GMROI percentage is: GMROI (%) = gross margin (%) x [sales ÷ average inventory @ cost]
4. Aged Rebates: Days outstanding in vendor rebates – number of total days of vendor rebate receivables
Industry averages for each of these can vary widely from chain-to-chain and year-to-year due to the following reasons:
1. The chain’s promotional focus on product – i.e. promote coffee and the inventory turns faster.
2. Significant changes in to consumer buying patterns – i.e. cigarette price increase that adversely impacts volume.
3. SKU Management – i.e. reduced SKU’s can turn inventory faster but risks out-of-stocks; customer preferences.
That being said, here are some general inventory turn ranges that NACS has reported over the years:
* Tobacco: 9 to 16 times a year
* Beverages: 12 to 18 times a year
* Beer: 12 to 24 times a year
* Wine: 7 to 15 times a year
* Automotive: 4 to 8 times a year
* Grocery: 5 to 10 times a year
* Foodservice (depends on what falls into this category): 19 to 38 times a year
