I would stay away from having a certain number of units or value of inventory at all times. That is not a very good inventory management practice.I'm at a sentence in my business plan that says:
"Company will hold ..... (this can be either dollar amount or number of units) of inventory at all times to ensure proper supply."
Ok, first you need to determine your projected annual sales in dollars (at cost) otherwise known as Cost of Goods Sold (COGS).How should I come up with this number? I don't need a break down by sizes or men/women. Just a general number that will satisfy my daily sales.
I want to be able to drive that number from something instead of just coming up w/ a number from thin air.
I think it should be based on the projected sales. E.g. I project 1,000 munits sold per quarter. So I should always keep X% of this on hand.
Ron, if you read this, can u please tell me where did u get the $12K. Or if someone else sees the formula please break it down for me.average annual inventory target of $12,600