Recently, the author led a team to a large private enterprise to do a consulting project on inventory reduction. We found a very interesting problem: because the company is relatively large, the inventory turnover rate of the company is assessed by stages–the purchasing department is responsible for the inventory turnover rate of raw materials, the production department is responsible for the work in progress, and the sales department is responsible for the final product. The result of the annual assessment is that the turnover index of the purchasing and sales departments has reached < P >, but the turnover index of the production department has not reached. It is said that the finished product has not been produced because of the shortage of materials. Since the inventory turnover index of the whole company has not been reached, the whole responsibility is basically borne by the production department.

their calculation formula is (taking the monthly average inventory turnover rate as an example):

raw material inventory turnover rate = total cost of raw materials delivered within a month/average inventory of raw materials

inventory in process = cost of finished products received within a month/average inventory in process

inventory in finished products = cost of materials sold per month/average inventory of finished products in stock

When we ask: Why do we need to assess inventory turnover rate in stages? Their answer is simple-to assess the operational efficiency of various departments and to distinguish responsibilities.

it seems reasonable! But it's not!