Inventory Turnover

High inventory levels do happen when prices are rising quickly because companies want to stock up on the supplies before the prices rise further. Marketing management wants to know how quickly the inventory is being sold as it is one indicator of the popularity of the product. Inventory turnover measures how quickly total inventory is sold and refilled, usually over the course of a year. It measures the velocity of inventory change and, since inventory represents money sitting in a warehouse, the sooner it is sold, the sooner the investment earns returns. This chapter emphasizes that a high inventory turnover is generally a good sign. Marketers have the responsibility to attract as many consumers as possible, thereafter, convert them to buyers so that retail inventories are kept to a manageable level consistent with the particular industry in which their company competes.