What is Inventory Efficiency?
This is the ratio between current inventory and the Maximum Inventory Needed to satisfy the demand.
This ratio is measured in % and has to be lower than 100%.
What is the maximum inventory needed?
We can use the example of a piece delivered every day. After its receipt, the Maximum Inventory Needed in-house is the demand until the next delivery, the following day. If this piece is delivered every week, the Maximum Inventory Needed in-house is the demand of the next 7 days.
If you own the material during its transit from the supplier and you count it as in-transit inventory in your ERP, the maximum inventory has to be increased by the demand during the Information Transit-Time.
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