Correct age in the Food Inventory

Aug 6th, 2022
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How to correct age in the Food Inventory

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A good inventory turnover ratio is between 5 and 10 for most industries, which indicates that you sell and restock your inventory every 1-2 months. This ratio strikes a good balance between having enough inventory on hand and not having to reorder too frequently.
The average age of Company As inventory is calculated by dividing the average cost of inventory by the COGS and then multiplying the product by 365 days.
An inventory turnover ratio any lower than two could indicate that sales are weak and product demand is waning. This could result in excess inventory on the warehouse shelves and wasted space and resources.
The average age of inventory is calculated by taking the average inventory balance and dividing it by the cost of goods sold (COGS) for the period and then multiplying it by 365 days. The average age of inventory is calculated over a period of one year.
Calculation of inventory age can be done with Inventory Age (Days) = Current Date - Date Added. As simple as that. This is usually used at Warehouse or store level.
The average age of inventory shows how many days it takes to sell a piece of inventory. An example: The retail companys inventory value is $1 billion and Net sales are $5 billion. In this case, the Average age of inventory is (1000000 / 5000000) * 365 = 73 days.
The average age of inventory gives insight into how fast a company is turning over its inventory. Generally, a faster inventory turnover (low average age of inventory) means that a company is efficiently selling inventory.
A good inventory age typically falls between 60 and 90 days from the receipt date. While a shorter time frame may be even better, inventory thats aged more than six months (180 days) is usually considered dead stock and should be prioritized before new products are ordered.

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