About this ebook
Inventory is an important management resource.
Inventory is said to be a source of profit for business, at the same time, to cause loss. Especially in manufacturing, retail and wholesale business, management indicators are used to measure whether product inventory is being converted into sales efficiently.
In general, the following two are used.
1. Inventory turnover rate
Inventory turnover (times) = sales · cost of sales (annual) ÷ inventory amount
The inventory turnover rate is mainly used by executives for presentations for investors or shareholders.
2. Inventory turnover period
Inventory turnover period = inventory amount ÷ sales or cost of sales (monthly or daily)
In fast-rotating industries such as foods, the daily sales are used for denominator and "days of stock days" is indicated.
The inventory rotation period is practically used well.
Annual average and month end stock are used for inventory, but the actual value for sales period / cost of sales is used for that period.
It is enough to explain the past and current situation of inventory, but I think that it is inappropriate as an indicator for future decision-making internally. In other words, it is not inventory turnover as management accounting.
I am convinced that inventory turnover days are an indicator that can assist decision-making to be shared by management, sales department in charge of operations, manufacturing, procurement, and logistics personnel as inventory-based management consultant.
Table of contents
Chapter 1
Now, why inventory turnover is paying attention?
(1) Inventory is a scorecard of the corporation
(2) Management efficiency
(3) Weekly operation cycle
(4) Management indicators related to inventory turnover
Chapter 2
Management Accounting and Financial Accounting
Chapter 3
CCC positioning and comparison between Japan and the United States, International comparison
(1) Key financial indicators
(2) Positioning of CCC
(3) CCC comparison between Japan and US
(4) Sporting goods industry
(5) Six major chemical companies in Japan
(6) Electronic components Industry in Japan
(7) Electronic components Trading companies in Japan
(8) MRO (Maintenance Repair and Operations) in Japan
(9) International comparison by industry
Chapter 4
Importance of information sharing on weekly performance results between management and operations sites
(1) Month-end closing and next month-end payment
(2) Monthly accounting system
(3) Accounts Receivable
(4) The case of Nidec Motor
(5) The case of HP
(6) Japanese companies pursuing Inventory freshness / time-axis management
(7) Japanese companies pursuing weekly operation
(8) Lehman shock (2008) through 2012 (after 311 Earthquake and Thai Flood)
Chapter 5
Management Methods, Promotion Structure and Required Systems and its usage
(1) Cash cycle and lead time
(2) Stock out rate
(3) Channel inventory turns
(4) Inventory Dollar Control and Unit Control
(5) Blind spots of accounts receivable management
(6) Effective management methods
(7) Effective system and its usage
Chapter 6
Practices: Inventory Dollar Control and Unit Control
(1) Inventory Diagnosis Clinic
(2) PSI balance
(3) Clinical records of products
(4) Simplified asset management – Inventory Dollar Control and Unit Control
(5) Inventory management: four-quadrant matrix method for inventory value and quality
About the author
Shigeaki Takai
IFC Consulting Ltd.
Managing Director
Inventory-centric management consultant
1956 born in Gunma Prefecture, Japan
1980 graduated from Osaka University of Foreign Studies
1980 entered Sony Corporation
International Operations Group, Logistics, Corporate Planning & Control, Production Group Global SCM Strategy
2013 entered Daito Seito Co.,Ltd. responsible for Operations and SCM activities
2016 formed IFC Consulting Ltd.
Utilizing its abundant experiences such as visiting about 54 countries including representatives for 15 years in India, Saudi Arabia, U.A.E. and Switzerland,
mainly management consulting, seminar lecturer, corporate training activities, advocate for strengthening of operation field, measures against global environmental problems, SDGs (Sustainable Development Goals - mitigation of overproduction and accounting fraud risks) through weekly operations and cashing speed activities.
* IFC stands for Inventory Freshness Control.
