Classic turns is COGS ($'s) over the period divided by average inventory value ($'s).
Â
Good measure for a return on (inventory) asset investment when measured in gross for all sales & inventory although public companies (and analysts who assess them) don't like to detail costs directly so they as often use Net Sales / Average Inventory.
Â
All get sketchy when trying to assess performance of SKUs at an individual level unless you are LEAN as can be and have single level (sold item to SKU) BOMs.
Â
Qty based turns is OK as it equates to use of Average cost over the period measured.
Â
For zero cost items it is the only real choice (and only benefit of measuring zero cost items is to drive you to minimize risk of getting stuck with out of rev or obsolete inventory to deal with - along with reduced storage space.)
Â
For most who haven't achieved a high velocity LEAN environment (where WIP moves through a well defined and highly controlled conversion process & only raw materials are SKUs), it gets trickier to measure turns for single SKUs.
Â
In a multilevel BOM-SKU environment, you must extrapolate the true qty that, many BOM levels up, become part of COGS (and then use that qty x Ave cost at the lower level SKU level to determine SKU turns). That is a measure that is good as a disincetive/counter-measure to simply pushing mid level BOM/SKU production that increases cost while it drains the inventory from the lower level being measured. Offsetting that may be the very real need to meet L/T goals at expected demand rates so it may be necessary to 'push' inventory (and cost) up the BOM.
Â
Any way you measure it is better than not measuring at all: Just come up with a way all agree upon (at all levels of the Org Chart) or it will alsways be a point of contention that reduces the value of the measure (since the focus will be on the 'how' it was calculated & less on the gola of the measure: Improve return on inventory investment... "investment" and "asset" being oxymorons when speaking of inventory in the lean world - but not to the taxman.)
Â
Rob Brown
Â
 Â
________________________________
From: Len Hartka <len.hartka@...>
To: vantage@yahoogroups.com
Sent: Monday, May 13, 2013 2:20 PM
Subject: [Vantage] How to calculate Inventory Turns
Â
Good Day:
RE: How to calculate Inventory Turns
I am about to get more serious about tracking Inventory
Turns and\or its evil twin Weeks/supply.
Basic calculation is simple. In words it is usage divided by inventory.
So if Usage 400 and inventory is 200 then Turns = 2.
Usage=100 Inv =200 then Turns = .5
Formula: [Turns] = [Years' Usage] / [Inv]
[WS ( weeks supply] =
[Inv] / [a week's usage]
For Inventory Turns:
Questions:
1. Is the usage Independent (Sales lines), Dependent ( issued to JOB),
sum of both.
2. Calculate based on Grand totals, or compute for each individual
Part#, then 'summarize" them into buckets.
Group on what? For the Group, do an average, just a % of
count, usage range,
3. Are Values in Dollars or Counts? Theoretically makes no difference,
but sometimes the cost is zero.
For usage value could use the PartTran:TransValue instead of
[usage] * [ Cost]
4. Delete oddballs or assume there are always oddballs so ignore and
just look for 'trends" not absolute value.
5. Goal for Turns = 3 or 5 or 7 or 15. I think for a machinery
maker it should be 3; but what about the spare parts end of the
business; i.e. parts with ONLY independent usage. Goal for Turns =
higher or lower?
60% of our Spare-Parts have a usage of 3per year or less.
80% of 6 per, year or less.
6. Include WIP in the inventory Value?
7. I get usage with a BAQ on the PartTran. What trans-Type ( see below)
for each type:
Independent: STK-CUS, MFG-CUS
Dependent: STK-MTL, INS-MTL, MTL-INS
STK-ASM? INS-ASM? MFG-WIP?
Field that indicates the type of transaction:
ADJ-CST - Adjustment to Stock Cost.---------XXX
ADJ-DEM - Adjustment to Demand Quantity. ------XXX
ADJ-MTL - Adjustment to Job Cost
Material.-----------------------------DEP? Changing qty issued?
ADJ-PUR - Purchase Price variance (created by A/P inv---XXX
ADJ-QTY - Adjustment to Stock quantity. ------XXX
ADJ-SUB - Adjustment to Job Cost
Subcontract.----------------------------------------------------------
----------------------------Outplant.
ASM-INS - Assembly to Inspection.
.--------------------------------------DEP? Is it a type of STK-ASM
transaction? Which is
actually Issuing matl to JOB????
DMR-MTL - DMR issue to job
material.-----------------------------------DEP? Removing issued matl.
DMR-REJ - DMR to Returns. ------XXX
DMR-STK - DMR to stock----------XXXX
DMR-SUB - DMR to subcontract.
.----------------------------------------------------------
---------------------------------Outplant
INS-ASM - Inspection to
Assembly.-----------------------------------------DEP?? Which is
actually Issuing matl to JOB????
INS-DMR - Inspection to DMR. ------XXX
INS-MTL - Inspection to Material.
.----------------------------------------DEP? Same as issuing MTL
INS-STK - Inspection to Stock. ------XXX
INS-REJ - Inspection to Reject. ------XXX
INS-SUB - Inspection to Job Subcontract.
.----------------------------------------------------------
----------------------Outplant
MFG-CUS - Shipment of Manufacturing Job to
customer.---------------------------------------------------IND ( but
only machines?)
MFG-PLT - Manufacturing Receipt to Plant. ------XXX
MFG-STK - Manufacturing receipt to Stock. ------XXX
MFG-VEN - Shipment of Manufacturing Job to vendor.-----------------DEP?
MFG-VAR - Mfg Cost to Variance. ------------XXX
MFG-WIP - Manufacturing Receipt to
Job.---------------------------------DEP
MTL-DMR - Job Material to
DMR.-----------------------------------------DEP?
MTL-INS - Material to Inspection.
.-----------------------------------------DEP?
PLT-ASM - Plant to Assembly. ------XXX
PLT-MTL - Plant to Material. ------XXX
PLT-STK - Plant to Stock. ------XXX
PUR-INS - Purchase receipt to Inspection. ------XXX
PUR-MTL - Purchase receipt to
material.-----------------------------------DEP
PUR-STK - Purchase receipt to stock. ------XXX
PUR-SUB - Purchased receipt to
Subcontract.----------------------------------------------------------
----------------------------Outplant
PUR-UKN - Purchased receipt to Unknown (not stock or Job). -XXX
RMA-INS - RMA Receipt to Inspection.
.----------------------------------------------------------
-IND( negative shipment)
STK-ASM - Stock to Job assembly.
.---------------------------------------DEP Which is actually Issuing
matl to JOB?????
STK-CUS - Shipment of Stock to Customer.
.----------------------------------------------------------IND
STK-DMR - Stock to DMR------XXX.
STK-INS - Stock to Inspection. ------XXX.
STK-MTL - Stock to Job
material.---------------------------------------------DEP
STK-PLT - Stock to Plant. ------XXX.
STK-SRV - Stock to Service.
.----------------------------------------------------------
----------------IND
STK-STK - Stock to Stock transfer. ------XXX.
STK-UKN - Stock to Unknown issue (miscellaneous
issue)---------------DEP?????
SUB-DMR - Job Subcontract to DMR.
.----------------------------------------------------------
-----------------------Outplant
SUB-INS - Subcontract to Inspection.
.----------------------------------------------------------
-----------------------Outplant
SVG-STK - Salvage Material receipt to Stock. ------XXX.
WIP-MFG - Job to
Job----------------------------------------------------------Duplicate?
( was used when issued in to WIP???)
Note: MTL-DMR replaced by MTL-INS, STK-DMR replaced by STK-INS. SUB-DMR
not changed, SUB-INS was not implemented. MTL-DMR and STK-DMR are
obsolete. However, code still references them for backward
compatibility.
Len
mailto:Len.hartka%40sunautomation.com
Leonard C. Hartka
66 Loveton Circle, Sparks, MD, 21152
Work: 410-329-3560 ext 120
FAX: -329-3564
Work Cell: 443-255-7192
Personal Cell: 410-292-8744
This e-mail and any attachments may contain proprietary and/or confidential information. If you are not the intended recipient, please notify the sender immediately by reply e-mail or at 410-472-2900 and then delete the message without using, disseminating, or copying this message or any portion thereof. With e-mail communications you are urged to protect against viruses.
[Non-text portions of this message have been removed]
[Non-text portions of this message have been removed]
Â
Good measure for a return on (inventory) asset investment when measured in gross for all sales & inventory although public companies (and analysts who assess them) don't like to detail costs directly so they as often use Net Sales / Average Inventory.
Â
All get sketchy when trying to assess performance of SKUs at an individual level unless you are LEAN as can be and have single level (sold item to SKU) BOMs.
Â
Qty based turns is OK as it equates to use of Average cost over the period measured.
Â
For zero cost items it is the only real choice (and only benefit of measuring zero cost items is to drive you to minimize risk of getting stuck with out of rev or obsolete inventory to deal with - along with reduced storage space.)
Â
For most who haven't achieved a high velocity LEAN environment (where WIP moves through a well defined and highly controlled conversion process & only raw materials are SKUs), it gets trickier to measure turns for single SKUs.
Â
In a multilevel BOM-SKU environment, you must extrapolate the true qty that, many BOM levels up, become part of COGS (and then use that qty x Ave cost at the lower level SKU level to determine SKU turns). That is a measure that is good as a disincetive/counter-measure to simply pushing mid level BOM/SKU production that increases cost while it drains the inventory from the lower level being measured. Offsetting that may be the very real need to meet L/T goals at expected demand rates so it may be necessary to 'push' inventory (and cost) up the BOM.
Â
Any way you measure it is better than not measuring at all: Just come up with a way all agree upon (at all levels of the Org Chart) or it will alsways be a point of contention that reduces the value of the measure (since the focus will be on the 'how' it was calculated & less on the gola of the measure: Improve return on inventory investment... "investment" and "asset" being oxymorons when speaking of inventory in the lean world - but not to the taxman.)
Â
Rob Brown
Â
 Â
________________________________
From: Len Hartka <len.hartka@...>
To: vantage@yahoogroups.com
Sent: Monday, May 13, 2013 2:20 PM
Subject: [Vantage] How to calculate Inventory Turns
Â
Good Day:
RE: How to calculate Inventory Turns
I am about to get more serious about tracking Inventory
Turns and\or its evil twin Weeks/supply.
Basic calculation is simple. In words it is usage divided by inventory.
So if Usage 400 and inventory is 200 then Turns = 2.
Usage=100 Inv =200 then Turns = .5
Formula: [Turns] = [Years' Usage] / [Inv]
[WS ( weeks supply] =
[Inv] / [a week's usage]
For Inventory Turns:
Questions:
1. Is the usage Independent (Sales lines), Dependent ( issued to JOB),
sum of both.
2. Calculate based on Grand totals, or compute for each individual
Part#, then 'summarize" them into buckets.
Group on what? For the Group, do an average, just a % of
count, usage range,
3. Are Values in Dollars or Counts? Theoretically makes no difference,
but sometimes the cost is zero.
For usage value could use the PartTran:TransValue instead of
[usage] * [ Cost]
4. Delete oddballs or assume there are always oddballs so ignore and
just look for 'trends" not absolute value.
5. Goal for Turns = 3 or 5 or 7 or 15. I think for a machinery
maker it should be 3; but what about the spare parts end of the
business; i.e. parts with ONLY independent usage. Goal for Turns =
higher or lower?
60% of our Spare-Parts have a usage of 3per year or less.
80% of 6 per, year or less.
6. Include WIP in the inventory Value?
7. I get usage with a BAQ on the PartTran. What trans-Type ( see below)
for each type:
Independent: STK-CUS, MFG-CUS
Dependent: STK-MTL, INS-MTL, MTL-INS
STK-ASM? INS-ASM? MFG-WIP?
Field that indicates the type of transaction:
ADJ-CST - Adjustment to Stock Cost.---------XXX
ADJ-DEM - Adjustment to Demand Quantity. ------XXX
ADJ-MTL - Adjustment to Job Cost
Material.-----------------------------DEP? Changing qty issued?
ADJ-PUR - Purchase Price variance (created by A/P inv---XXX
ADJ-QTY - Adjustment to Stock quantity. ------XXX
ADJ-SUB - Adjustment to Job Cost
Subcontract.----------------------------------------------------------
----------------------------Outplant.
ASM-INS - Assembly to Inspection.
.--------------------------------------DEP? Is it a type of STK-ASM
transaction? Which is
actually Issuing matl to JOB????
DMR-MTL - DMR issue to job
material.-----------------------------------DEP? Removing issued matl.
DMR-REJ - DMR to Returns. ------XXX
DMR-STK - DMR to stock----------XXXX
DMR-SUB - DMR to subcontract.
.----------------------------------------------------------
---------------------------------Outplant
INS-ASM - Inspection to
Assembly.-----------------------------------------DEP?? Which is
actually Issuing matl to JOB????
INS-DMR - Inspection to DMR. ------XXX
INS-MTL - Inspection to Material.
.----------------------------------------DEP? Same as issuing MTL
INS-STK - Inspection to Stock. ------XXX
INS-REJ - Inspection to Reject. ------XXX
INS-SUB - Inspection to Job Subcontract.
.----------------------------------------------------------
----------------------Outplant
MFG-CUS - Shipment of Manufacturing Job to
customer.---------------------------------------------------IND ( but
only machines?)
MFG-PLT - Manufacturing Receipt to Plant. ------XXX
MFG-STK - Manufacturing receipt to Stock. ------XXX
MFG-VEN - Shipment of Manufacturing Job to vendor.-----------------DEP?
MFG-VAR - Mfg Cost to Variance. ------------XXX
MFG-WIP - Manufacturing Receipt to
Job.---------------------------------DEP
MTL-DMR - Job Material to
DMR.-----------------------------------------DEP?
MTL-INS - Material to Inspection.
.-----------------------------------------DEP?
PLT-ASM - Plant to Assembly. ------XXX
PLT-MTL - Plant to Material. ------XXX
PLT-STK - Plant to Stock. ------XXX
PUR-INS - Purchase receipt to Inspection. ------XXX
PUR-MTL - Purchase receipt to
material.-----------------------------------DEP
PUR-STK - Purchase receipt to stock. ------XXX
PUR-SUB - Purchased receipt to
Subcontract.----------------------------------------------------------
----------------------------Outplant
PUR-UKN - Purchased receipt to Unknown (not stock or Job). -XXX
RMA-INS - RMA Receipt to Inspection.
.----------------------------------------------------------
-IND( negative shipment)
STK-ASM - Stock to Job assembly.
.---------------------------------------DEP Which is actually Issuing
matl to JOB?????
STK-CUS - Shipment of Stock to Customer.
.----------------------------------------------------------IND
STK-DMR - Stock to DMR------XXX.
STK-INS - Stock to Inspection. ------XXX.
STK-MTL - Stock to Job
material.---------------------------------------------DEP
STK-PLT - Stock to Plant. ------XXX.
STK-SRV - Stock to Service.
.----------------------------------------------------------
----------------IND
STK-STK - Stock to Stock transfer. ------XXX.
STK-UKN - Stock to Unknown issue (miscellaneous
issue)---------------DEP?????
SUB-DMR - Job Subcontract to DMR.
.----------------------------------------------------------
-----------------------Outplant
SUB-INS - Subcontract to Inspection.
.----------------------------------------------------------
-----------------------Outplant
SVG-STK - Salvage Material receipt to Stock. ------XXX.
WIP-MFG - Job to
Job----------------------------------------------------------Duplicate?
( was used when issued in to WIP???)
Note: MTL-DMR replaced by MTL-INS, STK-DMR replaced by STK-INS. SUB-DMR
not changed, SUB-INS was not implemented. MTL-DMR and STK-DMR are
obsolete. However, code still references them for backward
compatibility.
Len
mailto:Len.hartka%40sunautomation.com
Leonard C. Hartka
66 Loveton Circle, Sparks, MD, 21152
Work: 410-329-3560 ext 120
FAX: -329-3564
Work Cell: 443-255-7192
Personal Cell: 410-292-8744
This e-mail and any attachments may contain proprietary and/or confidential information. If you are not the intended recipient, please notify the sender immediately by reply e-mail or at 410-472-2900 and then delete the message without using, disseminating, or copying this message or any portion thereof. With e-mail communications you are urged to protect against viruses.
[Non-text portions of this message have been removed]
[Non-text portions of this message have been removed]