How is inventory like water flowing into and out of a bathtub? What is the inventory balancing equation? How do you measure how much inventory has been used during a specific time period, say a year? In operations that convert materials from one stage to another, like in manufacturing and baking, how is labor part of the inventory costs? Why is knowing Inventory Turns an important measure of the inventory asset?
How is inventory like water flowing into and out of a bathtub?
Companies keep a certain amount of inventory in warehouse to guard against unforeseen circumstances such as machine downtime, preventive maintenance schedules and many other factors. When customers make a purchase, part of those inventory are sent to the customer. The company then replenishes the same amount of inventory that was just sold. The inventory come in and out of the ...