If a facility has a higher turnover rate, what does that imply about inventory needs?

If a facility has a higher turnover rate, what does that imply about inventory needs?

• A. More inventory is required
• B. No inventory is required
• C. Less inventory is required
• D. Inventory needs remain the same

Answer: (C)

A higher turnover rate indicates that a facility is selling its inventory more quickly. This situation implies that the business effectively moves through products and likely experiences a robust demand for items. As a result, the facility does not need to hold as much inventory on hand at any given time since products are frequently sold and replaced in a rapid cycle. By having a higher turnover rate, the facility can operate with less inventory, focusing on restocking popular items based on customer demand rather than accumulating large quantities that may not sell quickly. This approach helps in minimizing holding costs and reducing the risk of overstocking items that may not be popular or could become outdated. Consequently, while the demand for products is high, the effective management of inventory ensures that the facility can maintain efficiency with a leaner stock level.

A higher turnover rate indicates that a facility is selling its inventory more quickly. This situation implies that the business effectively moves through products and likely experiences a robust demand for items. As a result, the facility does not need to hold as much inventory on hand at any given time since products are frequently sold and replaced in a rapid cycle.

By having a higher turnover rate, the facility can operate with less inventory, focusing on restocking popular items based on customer demand rather than accumulating large quantities that may not sell quickly. This approach helps in minimizing holding costs and reducing the risk of overstocking items that may not be popular or could become outdated.

Consequently, while the demand for products is high, the effective management of inventory ensures that the facility can maintain efficiency with a leaner stock level.