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Optimizing Inventory Turns

Six Sigma – iSixSigma Forums Old Forums General Optimizing Inventory Turns

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  • #29601

    RTP
    Member

    I am working on a project to identify the inflection point for inventory turns in a JIT assembly operation.  Does anyone have any recommendations on where to begin or a general formula for calculating the optimal number of inventory turns based on production level?  Any assistance is greatly appreciated – thanks.   

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    #76402

    Andrew M. Brody
    Participant

    What we do is slightly different, I will translate it into your parameters.  After the close of a month, convert all Finished Goods production (Do not include WIP.)  into hard dollars based on the cost of your production.  Divide this figure into the total dollars (also based on cost of production) of product shipped for the same month.  This ratio of product dollars shipped divided by dollars of product produced will give you your inventory turns for that month.  I realize that this is a bit simplistic, but it works for us.

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