Which metric can help assess the efficiency of inventory management?

The Inventory Turnover Ratio is a key metric for assessing the efficiency of inventory management. This ratio indicates how many times a company sells and replaces its inventory over a specific period. A higher inventory turnover ratio suggests that a company is effectively managing its inventory, implying that it is selling goods quickly and minimizing the amount of capital tied up in stock. This efficiency can lead to reduced holding costs and improved cash flow, which are critical factors in optimizing inventory management.

In contrast, customer satisfaction rating, employee productivity rate, and supplier delivery accuracy, while important metrics for overall business performance, do not directly measure how efficiently inventory is managed. The customer satisfaction rating reflects how well the business meets consumer needs rather than the effectiveness of inventory practices. Employee productivity rate pertains to workforce efficiency but does not specifically connect to inventory management. Supplier delivery accuracy is about how well suppliers perform but also does not indicate how inventory is managed internally. Therefore, focusing on inventory turnover allows for a targeted analysis of inventory management efforts.