Question

what are calculations that can be used to figure out replenishment of items? how do i figure out how many weeks/days on hand i have/need. an example is if i ordered 1069 cases of a product and sold 728 in the last 7 days with the stores having 9 days of inventory and 7 days of inventory in a wherhouse. would 1069 cases be to much?

Answer 1

Solution:

Step 1 – Calculating Inventory Turnover Ratio

Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory

                 = 1277/832

                = 1.535

Therefore putting the values from question to calculate ITR:

COGS = 9*104+1069 – 7*104 = 1277cases

Average Inventory = {(9Days * 104) + (7Days * 104)}/2 = 832 cases

[Note: Per day consumption is calculated as 728/7 = 104]

Step 2 – Calculating Days Inventory

Days Inventory = 365/Inventory Turnover Ratio

               = 365/1.535

                = 237Days

Therefore this company sold and replace its inventory 1.535 times in 12month of period. As well as company takes 237 days to sell its average inventory.