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January/February 2017 35 Resolution No. 3: Measure It Set appropriate goals for your buyers. Follow the old adage: People will do what you inspect, not what you expect. Every buyer or inventory planner should have goals for the products for which he or she is responsible. We have found two metrics that best analyze a buyer's or inventory planner's performance: Inventory Turnover Inventory turnover measures the number of times you sell or turn over your average inventory investment each year. In reality, it measures the number of opportunities you have to earn a profi t from every dollar of your investment in stock inventory. It is calculated by dividing annual cost of goods sold from stock sales by your average inventory investment. Remember that high profi ts can compensate for low turnover. A good rule of thumb in setting turnover goals is to make sure your turn-earn index (inventory turnover multiplied by your average gross margin percentage) is at least 120. For example, Better Inventory Control continued this can be accomplished with six turns at a 20 percent gross margin or four turns at a 30 percent gross margin. Customer Service Level The customer service level is the percentage of line items for stock products completely fi lled or shipped in one trans- action by the date promised to the customer. If the customer orders 10 pieces of a product, you must deliver all 10 to get credit toward the customer service level. Most companies aim for an overall customer service level of 95 percent (95 out of every 100 product requests are completely fi lled) and a 99 percent customer service level for critical items. Get the New Year started right by changing your corporate culture and embracing these three simple best practices. You will experience great results in customer satisfaction and increased profi tability. About the Author Jon Schreibfeder is president of Effective Inventory Management, Inc., a fi rm dedicated to helping manufactur- ers, distributors, large retailers and service organizations get the most out of their investment in stock inventory. He has designed several inventory management computer systems and also served as a distribution industry "trouble- shooter" for two major computer companies. A good rule of thumb in setting turnover goals is to make sure your turn-earn index (inventory turnover multiplied by your average gross margin percentage) is at least 120.