Graph # 4 of 8 From Company Dashboard - Inventory Turns

Inventory turns is a pretty common metric so chances are this metric is not new to you. This graph does add a target line shown as a horizontal line at the targeted monthly turns for the company.

As with any metric if a plant manager or vice president is primarily or even worse only compensated or incentivized by inventory turns, he or she could simply look to sell inventory at a reduce price or hold inventory of key components so low that it could affect production.

Sometimes, inventory could be held so low it will not only affect production but worse sales of that company.

Often times buyers can be so focused on reducing inventory that they will run the risk of not having enough inventory to sell to customers. That is probably the worst I have seen of trying to keep inventory low, because a superior said inventory must be reduced.

Do not compensate your buyers by just inventory turns - it will impact your company's bottom line.

Be sure you understand Economic Order Quantities (EOQ), Safety Stock, Service Levels, Inventory Priorities, and Reorder Points (ROP). If you build these concepts into your Inventory Optimization Plan, you will go a long way to improving your inventory planning.