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  • Essay / Case Study on Inventory Turn Analysis - 1233

    According to Scilly (2016), “if a company has an inventory turnover of 4, it means that it has completely exhausted its inventory four times over during the calculated period. A higher turnover is better because it means you are selling a greater quantity of goods relative to your inventory, resulting in lower storage costs” (p.1). To demonstrate the importance of inventory rotation, I will discuss product rotation for the automotive, hospitality, and retail industries. In the automotive industry, inventory turnover is extremely critical to the success of any given organization. This industry calculates inventory turnover by dividing total revenue (cost of goods sold) by total inventory (cost of automobiles in stock), typically for a period of one year. The average in the automotive industry is around 10 inventory turns per year. Meyerson (2011) stated that, generally, for automobile manufacturers, the higher the number; the better for the business. Research shows that Ford had the highest inventory turnover, 17 times per year, while Chrysler had the lowest, with just over 5 turns per year. We can conclude that Ford most likely has no problem having to reduce older inventory to move it, while Chrysler will likely have to be aggressive with year-end rules.