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Finished Goods Management
The management of finished goods is as important as the management of raw materials. The finished goods management dashboard will allow businesses to:
- Keep track the current stock, the inventory turnover;
- Monitor sales of products compared to production output;
- Monitor return on investment in inventories
| Goals | Questions to ask | Dashboard views |
| Track the current stock and inventory turnover | What is the quantity and value of goods currently in stock? What is the number of times inventory turns in during the period? Is the target achieved? | Current SOH, Current SOH $, ITR. Target ITR |
| Monitor sales of products compared to production output; | Is production enough to sell? How long will the inventory be enough to cover? What are the top 5 best selling products? Are these products still in stock? | Daily Sales Units, Sales Units, Sales $, Production Units |
| Monitor return on investment in inventories | How much profit does inventory turnover generate after offsetting inventory costs? | Gross Margin $, GMROI |
*Key Terms
Daily Sales Units:
Average number of finished products sold in a day
Sales Units:
Total number of finished products sold
Sales $:
Revenue earned from the sale of finished products
Gross Margin $:
Gross profit as sales minus cost of goods sold
GMROI:
An index that measures the profitability of finished goods inventory, it shows how much profit sales from inventory generate after covering inventory costs
ITR – Inventory Turnover Rate:
The number of times that the average finished product is turned over during the period
Target ITR:
Target inventory turnover
Current SOH:
The current number of items in stock
Current SOH $:
Current money in stock
Production Units:
Production output
Finished Goods Management Report
- Monitoring of sales and inventory simultaneously helps businesses to be proactive in planning production and consumption of products.
- It is necessary to ensure reasonable inventory, because too much inventory means that the amount of capital “contained” in the warehouse is high, not enough goods in the warehouse means that production and distribution is interrupted. Therefore, balance is the best “key”. And determining the inventory turnover ratio will help businesses plan production as well as manage inventory more easily.
- GMROI > 1 shows that the business is profitable, high profit margin is a good thing for businesses, but whether it is low or high depends on the industry (for example, family clothing: $2.56, furniture: $2.50, Consumer goods: $6.69,…). In addition to following industry standard benchmarks, businesses should maintain internal GMROI reports based on past data. Because if you are not satisfied with your existing earnings, you will have to research and take specific steps to improve your GMROI.
