Inventory management terms

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Glossary of Inventory Management Terms

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Inventory management terms

  1. 1. Glossary of Inventory Management Terms Return on Investment or ROI = what you are getting back for what you have invested in your inventory – your profit. Gross Margin Return on Investment or GMROI = the gross margin (or profit) you make on sales in the section against your inventory value in that section for unit of time – usually one month. COGS = Cost of Goods Sold = Beginning Inventory + Purchases - End Inventory Gross Margin %, Gross Profit % and Discount % are equivalent. If you buy some soapstone boxes at 45% discount, your gross margin is 45% of your sales. Avg. Inventory = Average Inventory = (Beginning Inventory + Ending Inventory) / 2 Inventory turns = The cost of goods for a period divided by the average inventory value for that period. $ Retail = $ Cost / (100% - markup %) $ Markdown = Original retail price - lower retail price Gross Margin = Sales - cost of goods sold Margin % = ($ Retail - $ Cost) / $ Retail Markdown % = $ Markdown / $ Net Sales Markup = The difference between the cost of an item and its selling price. Markup cancellation = Reduction from original markup % Planned Stock = Planned monthly sales x stock sales ratio Sell through % = Units sold / (units sold + on hand inventory) BOM = Beginning of Month EOM = End of Month Stock Sales Ratio = B.O.M. $ Stock / Sales for period Shrinkage = Difference between book and physical inventory Inventory Turnover = Turnover is the number of times you sell your average investment in inventory each year. Turnover = net sales for period / average stock for period Breakeven = Fixed Costs / (Revenue – Variable Costs) Weeks of Stock = Inventory divided by average weekly sales for a given period of time.

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