Determining the Consumption Rate
Because consumption rates are so integral to maximizing your
savings, it is essential that you properly determine these rates.
To do this, keep track of your purchases for your major inventory items in a spreadsheet or on paper. Periodically conduct an inventory to determine your consumption rate for each item. Consumption Rate Example Assume that you have purchased ten of an item (you had zero to begin with). At the end of four weeks you have six of the items left in your inventory. Your consumption rate is therefore one item per week as follows: Purchased 10 On hand after 4 weeks 6 Consumption/4 wks 4 Consumption rate = 4 items/4 weeks = 1 item per week Next, factor in the item's sale frequency. In this case let's assume that the item goes on sale about every four weeks. In this example, you over-purchased this item, unnecessarily tying up your money and increasing the chances of spoilage, because you are not using up the item as quickly as you thought you would. You actually only needed four of the item to last four weeks, but you bought ten (six too many). As you become familiar with your consumption rates, you will be able to optimize the quantities you need to keep in your inventory. NEXT: Sale Cycles |
Food Facts
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