Why do all leading retailers in the UK have a negative inventory turnover? Especially the ones dealing with supply of fresh produce. What is a good benchmark to compare these negative values.
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It basically means the store is *selling* more of the product that it *has to sell*.
Basically if I have 10 apples and I sell 5, I have 50% inventory turn over. If I have 10 and sell 10, that’s 100%, if I have have 10 and sell 15 now I have -50%. It’s a weird of writing it down, but that’s what they are saying.
This is generally *not good* for a company, but it gets very complicated quickly.
Best case is I get 10 apples morning, put them out, and sell 10 apples by closing. Perfect. Having exactly what I need is ideal. But what if my delivery is late? I have no spare apples so I can’t sell apples today. That’s not good. Maybe I should order extra apples and store them.
It’s not good if I get 100 apples, can only put 10 out, then sell 10 by closing. Not only to have I have to store 90 apples, I have to move them around, I have to restock my shelf, and some might go bad. So having extra stuff can often be bad.
It’s not good if I get 5 apples and sell 10 by closing (that’s your negative turnover case) because how do I sell an apple I don’t have? I might have just annoyed a customer who will never come back, *or* I need to rush out to a different store, but an apple at their cost (greater than my cost from the orchard) and maybe I’m losing money on that deal.
End of the day, supply chain is hard. Having too little, too much, or just enough of something are all problematic and advantageous for different reasons.
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