Stock turn
| Stock turn |
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| See also |
Stock turn is the number of times the total stock is bought and sold during one period of time. It also can be calculated on a basis of a specific product or departament (M. Wrice 2002, p.246). It is measured when warehouses and distribution centres calculated it as a part of daily, weekly or monthly inventory performance report (S. Grinsted, G. Richards 2016, p. 169). It does not measure effectinveness of stock control in meeting demand- it measures efficiency in doing so economically (P. Baily, D. James, D. Jessop, D. Farmer 2005 p. 142). In other words, it measures efficiency of busienss. The number points out how many stock item was sold during the course of accounting period (R. Leach 2010, ch. 7.1). Overall stock turn is calculated as follows: cost of total annual issues divided by value of average inventory level (S. Grinsted, G. Richards 2016, p.169). In practise, different items will have different stock turns's levels. Some may not by issued at all, like non-moovers (stock turn of zero). Others may be used and replenished weekly. Thereby, considering the overall stock turn for the whole inventory is useful. Furthermore, it is also wise to consider stock turn for each item individually. Stock turn for one item can be calculated using values (istead of quantities) (S. Grinsted, G. Richards 2016, p.169). Division of items due to individual stock turn (S. Grinsted, G. Richards 2016, p.169):
- fast moovers (the highest stock turn)
- slow moovers (the lowest stock turn)
- non-moovers (stock turn of zero)
Stock turn rate
According to P. Baily, D. James, D. Jessop and D. Farmer: "Stock turn rate for a high usage value item will (...) imrpove when instead of ordering threee month' supply the EOQ formula is used. Although high usage value item for quite a small propotion of the sum shown in the account for stock. Usually, EOQ policies improve yhe overall stuck-turn rate by frequent ordering of high usage value items, as well as reducing the number of orders placed by less frequent ordering of low usage value items." (2005, p.142)
Maximising stock turn
Benefits of maximsing stock turn are (M. Wrice 2002, p. 169):
- fresh merchandise
- sufficient depth without building of aged stock-up
- steady cash flow as a result of no connections between capital and poorly performing merchandise
- minimalization cost connected with procuring, holding and maintaining stock
- stock's flow through the distribution system is smoother and faster
References
- Baily P., James D., Jessop D., Farmer D. (2005) Purchasing Principles and Management Pearson Education, London
- Grinsted S. Richards G., (2016) The Logistics and Supply Chain Toolkit: Over 100 Tools and Guides for Supply Chain, Transport, Warehousing and Inventory Management Kogan Page Publishers, Harlow
- Leach R. (2010) Ratios Made Simple: A beginner's guide to the key financial ratios Harriman House, Petersfield
- Munisea F. (2014) The Provoked Economy Economic Reality and the Performative Turn Routledge, London
- Wrice M. (2002) First Steps in a Retail Career Macmillan Education, South Yarra (Melbourne)
Author: Dominika Kuraś
