Average Inventory

CIOP training and certification program is delivered over 90 hours of classroom/online training in corporate and retail batches. The uniqueness of this program is that it addresses the modern supply chain trends without loosing the traditional aspects. This program prepares the participants for supply chain management in 2025 and beyond by infusing the learnings need in the areas of industry 4.0 such as Internet of Things (IoT), Blockchain, Artificial Intelligence (AI), Machine Learning (M/L) and Robotic Process Automation (RPA). It also deals with process improvement philosophies, methods, and tools such as Microsoft Visio. The program deals with almost 50+ supply chain analysis techniques.

What Is Average Inventory? Average inventory is the quantity of inventory on hand, ready for sale, or the quantity of merchandise that you currently have on reserve, ready to be used, but not on order. It is used to measure the profit and loss in your company's supply chain.

There are several ways in which to calculate average inventory levels, but usually the method is to use two or more time periods to average inventory across the outlets in your company's distribution network. You will then divide the current period's average inventory by the corresponding period of the previous period, then round the quotient to the nearest whole number. For example, if your inventory at the end of one period is 100, then your current average inventory level is 100. If your inventory at the end of the second period is 1000, your current average inventory level is 1000/100 or one tenth of a percent of your total inventory. Calculating average inventory using these methods requires knowledge of period length and standard deviation of values.

In many cases companies try to control their inventory turnover ratio by using a log scale that shows the rate of change in the stock on a seasonal basis. However, this can lead to false conclusions, as they may incorrectly assume that the rate of change is stable or trending downward, when it could be leveling off instead. This may also lead to underestimating actual inventory levels, especially in cases where there are short periods of time where sales are slow or flat. To combat this problem, many organizations now use data analysis software, such as SAS, to perform an inventory analysis of their business. This enables businesses to more precisely define their assumptions about the relationship between stock changes and inventory turnover ratio and allows them to better measure their progress with accuracy.

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