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KNOWLEDGE LIBRARY

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27Jun

Warehouse Occupancy Percentage

Optimal storage utilization helps enforce healthy inventory management. In our early work with Honda their...

02Jun

Efficient Procurement Inventory

Efficient procurement inventory (EPI) is often required to realize steep discounts when a special opportunity...

02Jun

Inventory Carrying Rate

The inventory carrying rate (ICR) is the percent of the unit inventory value used to...

26Jun

Inventory Activity Profiling & Data Mining

Suppose you were sick and went to the doctor for a diagnosis and prescription.  When...

27Jun

Inventory Performance Measures

Inventory performance measures include financial, productivity , quality, and response time indicators for evaluating the efficiency and...

Inventory Value Added™

LRI developed Inventory Value Added™ (IVA) as an inventory financial performance measure several years ago. It is the difference between gross margin and inventory carrying cost. Like GMROI, it holds gross margin accountable for the inventory investment required to achieve it.  It is the best indicator we have developed so far to predict the impact of various inventory strategies on shareholder value.

IVA = GM – ICC

In the first example the maximum IVA™ is $475,557 achieved at a target unit fill rate of 99.95% and a target inventory turn rate of 12.4. For the slower moving SKU in the second figure the maximum IVA™ is $23,878  achieved at a target unit fill rate of 90.00% and a target inventory turn rate of 4.2.

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