ASSIGNMENT

OF
SUPPLY CHAIN MANAGEMENT

Submitted to: Submitted by:

Prof. Hemant Kumar Varun Kumar
19BSP3167
Section-D
Why it is desirable to increase a company's inventory turnover ratio? discuss the Inventory turnover ratio
of an FMCG Company or an Auto manufacturing Company?
Ans- High inventory turnover means company efficiently sell product on hand and replace it with fresh
products. In general, a high turnover ratio means company are either selling a lot of products or
company aren't ordering enough to cover demand.
Price Stability
Turning over inventory quickly helps to company maintain price stability. Since company don't have to
hold regular sales promotions to get rid of excess inventory, company can sell more items at regular
prices. This helps company get the best profit margins on sales and also helps company maintain brand
and product quality images. Customers get used to paying regular price and are less likely to expect a
discount.
Fresh Product
Company top customers want to see something new and different when they come to company store. If
company turn over inventory slowly, company customers may become desensitized and less likely to
look around. They may even become bored and visit less frequently, which is not good for business. By
selling efficiently, company can keep fresh new products coming in and regularly rotate items in
different display areas to get the attention of regular customers.
Buying Power
Selling through more inventory allows company to negotiate better deals with suppliers in many cases.
Distributors often offer volume discounts to companies that buy a lot of inventory at once. If company
consistently sell products in high volumes, company can order more on each purchase and get better
rates. This improves company inventory costs, which allows company to pass on savings to customers
or pocket greater margins on sales.
Less Waste
High turnover also helps company protect against waste from perishable or expired items. If company
sell fresh fruit, for instance, high turnover helps company keep fresh stock for customers and minimize
the amount of product thrown out due to rotting. Cold and flu medication and food items are common
examples of products that expire. As these items near expiration, company often have to discount them,
or eventually throw them out as loss .

How to improve inventory turnover ratio?

 Better forecast
 Improve sales
 Reduce the price
 Better inventory pricing
 Focus on top selling products
 Better order management
 Eliminate safety stock and old inventory
  Reduce purchase quantity

Maruti Suzuki India Inventory Turnover ratio

Inventory Turnover measures how fast the company turns over its inventory within a year. It is calculated as Cost of
Goods Sold  divided by Total Inventories. Maruti Suzuki India's Cost of Goods Sold  for the three months ended
in Dec. 2019 was $2,106.49 Mil. Maruti Suzuki India's Total Inventories for the quarter that ended in Dec.
2019 was $550.81 Mil. Maruti Suzuki India's Inventory Turnover for the quarter that ended in Dec. 2019 was 3.82.
Days Inventory indicates the number of days of goods in sales that a company has in the inventory. Maruti Suzuki
India's Days Inventory  for the three months ended in Dec. 2019 was 23.86.
Total Inventories can be measured by Days Sales of Inventory (DSI). Maruti Suzuki India's days sales of inventory
(DSI) for the three months ended in Dec. 2019 was 17.26.
Inventory-to-Revenue determines the ability of a company to manage their inventory levels. It measures the
percentage of Inventories the company currently has on hand to support the current amount of Revenue. Maruti
Suzuki India's Inventory-to-Revenue for the quarter that ended in Dec. 2019 was 0.19.