Inventory Turnover Analyser

Inventory Turnover = COGS / Average Inventory. Industry benchmarks: FMCG 8–12x, Automotive parts 6–10x, Electronics 4–8x, Textiles 3–6x, Industrial goods 2–4x. Higher turnover means less cash tied up in stock. Low turnover consistently indicates overstocking, slow-moving items, or poor demand forecasting.

Inventory holding cost = Storage + Insurance + Obsolescence risk + Opportunity cost of capital. Typically 18–25% of average inventory value per year. A ₹25 lakh average inventory costs ₹4.5–6.25 lakhs per year to hold. Reducing average inventory by ₹5 lakhs saves ₹90,000–1.25 lakhs annually in carrying cost.

ABC Analysis: A items (20% of SKUs, 80% of value) — tight control, review weekly, minimal safety stock. B items (30% of SKUs, 15% of value) — moderate control, review monthly. C items (50% of SKUs, 5% of value) — simple rules, bulk ordering, minimal management attention. Focus on A items — that is where inventory investment and risk are concentrated.

Define dead stock as inventory not sold in 6+ months. Identify through ERP or inventory management software. Liquidation options in priority order: vendor return if contractually possible, resale to competitor at cost, use in other product variants, sell at 30–40% discount to clear, donate for CSR tax benefit, or write off as accounting loss. The carrying cost justifies even a 40% discount sale.

EOQ = Square root of (2 × Annual demand × Order cost / Holding cost per unit per year). EOQ gives the optimal order quantity that minimises total ordering plus holding cost. In practice, also consider minimum order quantities from suppliers, bulk discount thresholds, and storage space constraints.