How to Calculate Inventory Turn Rate
1 like3,465 views
Your inventory turn rate compares the number of frames sold each year to the number kept in inventory to determine if inventory is keeping up with frame demand. An ideal turn rate is between 3-4, indicating inventory is neither too large nor too small. A turn rate below 3 suggests excess inventory, while above 4 could mean limited selection from lack of inventory. A practice should calculate its turn rate to ensure frames are available to meet patient needs.
How to Calculate Inventory Turn Rate
- 1. Inventory Turn Rate Is Your Frame Inventory Keeping Up with Sales?
- 2. Frame sales are a big portion of most practice’s revenue! It’s important that your inventory is keeping up with your patient’s frame demand.
- 3. Your inventory turn rate gives you insight on whether your inventory is keeping up or falling behind your frame sale rate.
- 4. To calculate: Inventory Turn Rate = Number of frames sold each year Number of frames kept in inventory
- 5. Industry Benchmarks Inventory Turn Rate = Inventory Turn Rate = 3 4 Your practice has slow moving inventory= = Your practice needs a larger selection of inventory
- 6. A low inventory turn rate (less than 3) might imply poor sales and therefore, excess inventory. Whereas a high turnover rate (more than 4) could be a sign of lack of inventory and limited selection of products.
- 7. However, having a rate that isn’t 3 – 4 times isn’t necessarily a sign of a problem. In fact, higher end, lower inventory opticals should strive for a higher rate. A healthy inventory turn rate should usually, but not always, fall between 3 and 4.
- 8. What is your practice’s inventory turn rate? =÷Number of frames sold each year Number of frames kept in inventory Inventory Turn Rate