Assessing industries by inventory turns and days

2022

Elvis Miguelangel Cumpa Soto

Universidad Peruana de Ciencias Aplicadas (UPC)

Discovering Inventory Problems

• For which industries is inventory relevant and important?

   

• How may inventory affect companies’ financial performance?

   

• How do I know if I have an inventory problem?

Inventory turns or days

Inventory by Consumer Staples Industry

Summary

• The Food & Staples Retailing sector stands out for having a faster inventory cycle compared to the other two sectors. This means that companies in this sector tend to sell and replenish their inventories in a shorter period of time, which may indicate a more agile and efficient inventory management.
  
  
• On the other hand, the "Food, Beverage & Tobacco" and "Household & Personal Products" sectors show longer inventory cycles. This suggests that companies in these sectors may take longer to sell and replenish their inventories, which may be indicative of less agile production and distribution processes or greater complexity in product management.
  
  
• In summary, this comparison underscores the importance of considering inventory turnover times in different sectors. A shorter inventory cycle may indicate more efficient inventory management and a greater ability to adapt to changes in demand, while a longer cycle may point to areas for improvement in inventory management.

Summary

• The "Tobacco" sector stands out for having the longest inventory cycles in all percentiles, with the top 90% reaching up to 1832 days. This suggests that companies in this sector may take a long time to sell and replenish their inventories, which may indicate less agile inventory management or lower product turnover.
  On the other hand, the "Soft Drink" sector shows shorter inventory cycles compared to the others. The bottom 10% complete their inventory in just 39 days. This suggests that companies in this sector have more agile inventory management and can respond more quickly to changes in demand.
  
  
• The "Distillers & Vintners", "Agriculture Products" and "Packaged Foods & Meats" sectors show intermediate inventory cycles, with variability in their results. This indicates that companies in these sectors have different levels of inventory management efficiency.
  
  
• In summary, this comparison highlights the importance of considering inventory turnover times in different sectors. A shorter inventory cycle can indicate more efficient inventory management and a greater ability to adapt to changes in demand, while a longer cycle can point to areas for improvement in inventory management. The "Tobacco" sector can benefit from strategies to accelerate its inventory turnover, while the "Soft Drink" sector is demonstrating agile and efficient management of its inventories.

Trend of Inventory

Inventory over time - any chances and trend?

Inventory Distribution Along Supply Chains

Which segment(s) of a supply chain carry a large amount of inventory and thus likely to have inventory problems?