Stock turns four times a year. Half the cash sits in lines that turn once.

Aggregate inventory ratios are weighted averages, and the weighting quietly hides the money, usually in the lines nobody has looked at since they were ordered.

By Steve 5 min read
Abstract bridge artwork for Stock turns four times a year. Half the cash sits in lines that turn once.

A stock turn of four is respectable in most distribution and product businesses. It gets reported to the bank, sits in the management pack, and rarely provokes a question. Then the year-end count happens, someone walks the back of the warehouse, and it becomes obvious that a large share of the working capital is sitting in lines that have not moved since the spring. Both facts are true at once. The ratio is not wrong. It is simply an average weighted in a way that guarantees the fast movers write…

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