A Better Way to Measure the Inventory Turnover Ratio metric, a Key Performance Indicator for Businesses

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Inventory management is a key activity in many organizations. Its performance is often measured by the inventory turnover ratio metric, or ITR for short. This is a key performance indicator that managers are incentivised to improve. However, improper measurement of the ITR metric can cause problems in terms of reliability, comparison, and bias. Professor Benjamin Melamed of Rutgers University has proposed novel formulations of Little’s Law. The traditional Little’s Law is used an as approximation of real-life measurement, whereas Melamed’s versions are exact and robust.