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If you rent your storage space from another company, you can decrease how much you spend monthly on inventory that hasn't moved. Most companies should strive for a high turnover ratio since it reduces the costs associated with storage. Your inventory turnover ratio tells you how many sales you generate from the products in your warehouse, giving you a baseline number to help you determine new ways to improve your ratio and increase online sales. In addition, it may also mean you're not effectively marketing products, so your customers don't know you have inventory in stock to purchase. Most importantly, your inventory turnover ratio can help you make better business decisions in terms of pricing, manufacturing, marketing, and warehouse management.įor example, if your inventory isn't turning over and people aren't buying your products, it could indicate that your prices are too high or too low, depending on current market conditions. Knowing your inventory ratio can improve your business in several ways. How can inventory turnover ratio help your company? The inventory ratio will explain how many times you sold and replenished inventory to help you understand mistakes made during the management process, changes in consumer buying habits, and more. Inventory management is crucial because mistakes can affect your inventory turnover ratio, including a slower-than-usual supply chain, overstocking, and changes in customer demand. Ultimately, it's the number of times you replace your inventory compared to the cost of the stock over a period of time. What is inventory turnover? Inventory turnover is a value that shows how often your inventory turns over or moves, measuring how fast companies sell products.