Inventory Sell Through, Turnover & Profits

Modified on Tue, 11 May 2021 at 04:40 PM

The Inventory Sell Through, Turnover & Profits dashboard is a combination of widgets: Key Performance Indicators (KPIs), focused metric tables and graphic displays of your data. This dashboard gives you the ability to look at very high level metrics, as well as metrics at the individual item level. Here you will see how the sell through and inventory turnover is related to your gross profits, and how inventory is performing in various scenarios. The data here represents your inventory for physical items; if your operation includes the sales of pre-owned goods or services, that data will not be included.

Since no single metric can tell the whole performance story, this dashboard will focus you on gross profit, gross margin %, sell through rate and inventory turnover period. You will see how your individual locations are performing and which inventory categories might beneift from adjustments to inventory.

You might want to analyze how a certain type of product contributes to the bottom line - maybe the gross profits are lower than you expect, yet the product sell through is high - is this an opportunity to test some price elasticity? Maybe the gross profits are where you need them to be, yet the turnover period tells you that it takes several months to move through the inventory - what is the cost to store that inventory? Can your vendors deliver product more frequently at lower volumes to free up some space for other inventory? Maybe your purchasing team got an amazing deal on the cost of a product by purchasing a large amount of it - that certainly will contribute to the gross profits, if the product turnover period is high though, the cost of storing it could offset that great deal.

Perhaps you want to look at the performance of a certain manufacturer of goods, or specific items that you carry throughout your stores. Using the filters on the dashboard to narrow to that focus, you can see that performance across the chain and begin digging deeper as your analysis uncovers trends. Maybe your locations in a certain geographic area perform above (or below) average - is this an opportunity to adjust your product allocation strategies? Of course you want to earn the highest shelf rent from the products that are occupying the space - start digging into the metrics here.

Let's start with some definitions of the metrics - and note that when you hover on each widget, an info icon will be visible in the top right corner, the definition for each metric is included there.

Gross Profit: nets sales - COGS

Gross Margin %: gross profit / net sales

Sell Through Rate: units sold / beginning inventory; the amount of inventory that moves through the system

Inventory Turnover Rate: COGS / average inventory cost; the speed at which inventory moves through the system

Inventory Turnover Period: 365 / inventory turnover rate; the number of days to sell through inventory

It is important to note that the data considered begins with the date on the heading panel of the dashboard, under Earliest Analysis Date. This means that your metrics and filtered data will start with the inventory data on this date.

You will see a link to this document in the top of the dashboard, under the heading Dashboard Help.

Date Picker

To the right of the dashboard header you will see a date picker - select both a the From and To date in full months that you wish to analyze and hit the Update Dashboard button. Remember that the inventory values are as of the first day of each month.

KPIs

The first section will show you two sections of KPIs. The first section will respond to the dashboard filters as you narrow your focus. The second set will remain whole, without responding to the filters. This will allow a high level comparison for you to see the relative values of your filtered data vs. the overall data. Remember that when you hover on each widget, an info icon will be visible in the top right corner, the definition for each metric is included there.

Turnover & Sell Through

This section of the dashboard will identify groupings of inventory turnover, how inventory turnover relates to gross profits and how sell through relates to gross profits.

In the first graphic, the turnover period is shown for periods of time, according to large product groups, such as category primary name or aggregate name - the heading will describe this grouping. The turnover period, for example between 30-60 days, is shown as a column that includes the categories with turnover between 30 and 60 days. The height of the column is driven by how many product groups are included in that turnover period. You can click on the column to filter the dashboard to the products in this turnover range. Depending on your inventory catalog, you may have a single category, say Miscellaneous, that has a very large turnover and can skew this chart with a single tall column overshadowing the others - use the dashboard filter to remove the category and bring the chart into sharper focus.

The second chart uses the same product categories and shows how the turnover period relates to your gross profits. The turnover period is annualized, and based on average monthly performance - this will allow you to selected a date range for the dashboard that is less that a year and see an annualized metric. You might for example, have a category that turns over every 25 days (generally a great turnover), yet the average monthly gross profits are low; is there room for price adjustments since the turnover is so good? You might have a category that turns over every 60 days, with an average monthly gross profit that is quite high; this product might be worthy of the storage costs to keep it for 60 days, or you might think about more frequent deliveries from your vendors. As with the first chart, you can bring this one into sharper focus by filtering the outliers - you can do this by toggling on the fields in the legend to turn them on & off. For starters, high turnover periods with low profits are categories you will want to review - these products are taking up storage space and potentially not givng you enough profit to be worth storing them for long periods.

The third chart is similar to the second, and shows how sell through relates to your gross profits. This sell through rate is an average monthly rate - this again will allow you to select the date range you wish to review and see an average value. Remember that sell through is the amount of inventory that moves through the system - you might have a category of product with a 25% sell through - this represents the quantity that sold over the quantity you had on hand at the begining of the month. A low sell through rate could mean that your product is not moving off the shelves, or it could mean that your inventory is higher than what your customer purchasing habits will support. Likewise, a high sell through rate could mean that the product is very popular, with perhaps room for price increases - or that your inventory levels maight be a bit low - you will want to explore both. As with the turnover period analysis, you want to look at how your products move relative to how much profit you receive. The longer products stay on your shelves, the more it is costing you - keep in mind that the same shelf space could be given to products with higher sell through & that would add dollars to the registers.

Perhaps you have a product group that turns over in 30 days with a decent monthly gross profit (remember here that the second row KPIs at the top of the dashboard will show you the average monthly gross profits without regard to any filters, so you can judge what is significant). If you also see that product group with a high sell through rate, you've probably got a real winner. Suppose you have a product group with a long turnover period, yet it contributes nicely to gross profits each month. You may also see this product with a low sell through rate - you will want to look at the volume of inventory you are holding, and the associated costs. Products with long turnover periods, low sell through rates and low contributions to gross profit are probably ready for a special promotion to move them along and give the shelf space to a better performer. Keep in mind that the cost of holding shelf space in the store or warehouse for a low performer should also consider how much another product might earn in its place. Think about this in terms of getting the best rent for the space. If you have product taking up space and not contributing to the bottom line, it is not paying the highest rent you can get. When you have product on the shelf that tuns over quickly and sells through what you have on hand at a good rate, it is paying better rent than the product that doesn't move quickly.

Data Table

The pivot table at the bottom of the dashboard allows you to see Gross Profit and Gross Margin % in a variety of dimensions. You can interact with this pivot table by adding or removing fields that will help your analysis. By right clicking on a header or row, you will see a list of fields that can be added to the pivot table. Simply click on them to add or remove.

Depending on the size of your inventory catalog, your entire inventory by item might not load. Use the dashbaord filters to narrow the inventory search before adding Item Name.

Any of the data tables can be exported to work with the data outside the dashboard. Do this by clicking on the 3 dots at the top right corner of the widget, choose Download and export an image or file. The recommended file type for a spreadsheet is CSV.