Question

Higher days of supply means ________ inventory. Higher turns means ________ inventory.

more, less

less, less

less, more

more, more

Answer 1

Right ans. is 1- more, less Inventory can be divided into direct and indirect inventory. Direct inventory includes raw material, work-in-process and finished-goods-inventory. Indirect inventory includes Maintenance, Repair, and Operating Supplies.Two common measures to evaluate inventory performance are Inventory turns and days of supply. We can judge a company’s inventory performance on its inventory turns by comparing it to the industry average or the inventory turns of its main competitors. The greater the inventory turns, the better the performance of a company in managing its inventory. However, greater days of supply indicates poor performance because it means the firm has more inventory sitting around. In inventory management, ABC classification is a commonly used method which can be done either in dollar usage, volume, frequency, or importance. A items normally are those items with higher value or higher turnover, but not always. B items and C items can be upgraded to A items. Some A items may have low value or low turnover but are still of strategic importance to the company.