Jack’s Pottery Outlet has total end-of-year assets of $5 million. The first-of-the-year inventory was $375,000, with a year-end inventory of $325,000. The annual cost of goods sold was $7 million. The owner, Eric Jack, wants to evaluate his supply chain performance by measuring his percent of assets in inventory, his inventory turnover, and his weeks of supply. We use Equations (11-1), (11-2), and (11-3) to provide these measures.
Percentage invested in inventory = (Average inventory investment/Total assets) × 100 (11-1)
Inventory turnover = Cost of goods sold/Average inventory investment (11-2)
Weeks of supply = Average inventory investment/(Annual cost of goods sold/52 weeks) (11-3)
