It’s calculated by adding the beginning inventory and ending inventory, then dividing by two: Average inventory = (Beginning Inventory + Ending Inventory) / 2 The average inventory refers to the mean value of inventory within a certain period of time. This includes raw materials and labor expenses, but not indirect expenses such as distribution costs and sales force costs. In this equation, the cost of goods sold refers to the direct costs attributed to the production of the goods sold by a company. The format would look like this: Inventory turnover ratio = COGS / Average Inventory If your brand is having some operations woes (or you just want a super sleek system where all your eCommerce data is in one place), sign up for a free on-demand demo here.The inventory turnover ratio is typically calculated by dividing the cost of goods sold (COGS) by average inventory during a specific accounting period. Strong eCommerce operations are part of a balanced eCommerce brand’s breakfast, and we hope this quick list may have clarified a thing or two.Īt Daasity, we support all elements of eCommerce data, including operational data. Having reliable software to organize your operations, collaborate between teams, optimize spending, and generate reports can be the difference between life and death as your brand scales.įor even more about ERPs, we love this article from BigCommerce. The why: Simply put, tracking the back end of an eCommerce business is complicated. The how: Choosing an ERP platform that is appropriate for your business is key, and implementing it carefully is equally important. Some companies also use their ERPs as a CRM as well (others use separate software for that purpose, such as a specialist small business CRM) For eCommerce operations, this means your finance, product, inventory and warehouse management systems. The what: ERP refers to software that a business uses to manage daily operations. ![]() ![]() ![]() Marketing teams can also use SKUs to track sales data to get a more granular understanding of which items are the most successful and learn more about how customers are using their product. The why: Using SKUs, eCommerce Operations teams can track inventory levels and decide when to place new POs for specific items vs the entire product or category of products. Ensure that you are careful with generating SKU numbers and keep a close eye on organizing them. The how: If your brand has a small product catalog, your "sitSKUation" is probably fairly simple, but if you’re in an industry such as apparel, you might find that your sitSKUation is incredibly complicated. ![]() PNCI - BLK - 10 for cast iron pan black 10in vs PNCI - BLK - 16 for cast iron pan black 16in The what: A SKU is a number or barcode (or both) that a brand uses to internally track inventory based on variables of the product. If you want to learn even more about inventory turnover, check out this article from Skubana. Too little supply means unhappy customers and potentially higher costs to expedite shipment from suppliers. Too much supply means that the marketing team has to scramble to sell more product, and storage costs for that supply increase. It also helps you optimize purchases from your supplier(s): ordering too much or too little supply of product can put pressure on different teams within your company. The why: Tracking and understanding your brand’s inventory turnover over the course of a year is key to understanding how efficient your business is at moving product.
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