California Management Review · 2014 · 27 citations · 0 references
ManagementOperations ManagementRetail ManagementCost AccountingInventory ControlInventory ManagementInventory AnalyticsInventory Cost AnalysisInventory ReductionInventory StrategyInventory TheoryRetail Inventory ManagementExcess Inventory AnalysisExcess Inventory RiskInventory Loss AssessmentInventory ScreeningInventory SurveillanceOut-of-stock MeasurementRetail Inventory Control
Retail inventory is closely monitored by retailers, investors, lenders, and suppliers as it signals a retailer’s health, sales prospects, and cost pressures. This article synthesizes the perspectives of investors, lenders, and suppliers on inventory. The authors introduce adjusted inventory turns, a new metric that all stakeholders can use to evaluate whether a retailer holds too much or too little inventory. While traditional inventory turns has limitations that diminish its usefulness, the adjusted metric offers a more reliable assessment for all parties.
Retail inventory is a statistic that is closely watched by retailers as well as their investors, lenders, and suppliers. Retailers not only benefit from inventory, but also bear the cost of excess inventory. Investors, lenders, and suppliers interpret this statistic for signs of the retailer's health, future sales prospects, and impending costs. This article synthesizes the perspectives of investors, lenders, and suppliers on inventory. Moreover, the article shows that inventory turns, a commonly used metric to identify excess inventory, has important limitations that reduce its utility for all these stakeholders. It then presents a new metric, adjusted inventory turns, which can be effectively utilized by all stakeholders to assess whether a retailer is carrying too much or too little inventory.