PLAYBOOK / STEP 1
Diagnose a low inventory turnover.
A depressed ratio has four typical causes. The fix is not the same for any two. The diagnosis takes 90 minutes with a clean ERP extract.
The four causes
| Cause | Signal | Fix horizon |
|---|---|---|
| Overstock | Top decile SKUs carry >90 days | One quarter |
| Slow-mover concentration | Bottom 30% of SKUs hold >40% of dollars | Two quarters |
| Seasonality | Q4 build inflates Q1 average | Annual calendar |
| Write-off avoidance | SKUs aged >365 days at full cost | One reporting cycle |
ERP extract
Pull SKU-level rows for the trailing twelve months: SKU, on-hand units, on-hand cost, last receipt date, units sold, sales dollars, COGS dollars. Compute days-on-hand per SKU as on-hand units divided by daily velocity. Bucket the SKUs into the four causes above.
What gets done first
- If write-off avoidance is the dominant cause, address it before SKU rationalisation. The write-off itself moves the ratio.
- If overstock is the dominant cause, lift reorder-point discipline. SKU rationalisation may not be needed.
- If slow-mover concentration is the dominant cause, the next page is the right next step.
Step 1 / 6
Diagnose low turnover
Bucket the SKUs into overstock, slow-mover, seasonal, or write-off-avoidance.