What is a good GMROI in distribution?


What is a good GMROI in distribution?

A GMROII number greater than 1 means you’re making and keeping money while GMROII less than one is cause for concern.

What is a good GMROI percentage?

Some sources recommend the rule of thumb for GMROI in a retail store to be 3.2 or higher so that all occupancy and employee costs and profits are covered.

How is GMROI calculated?

Divide the sales by the average cost of inventory and multiply that sum by the gross margin percentage to get GMROI. The result is a ratio indicating the inventory investment ‘s return on gross margin.

What is a high GMROI?

It measures how productively you’re turning inventory into gross profit. A GMROI ratio greater than 1 means you’re selling inventory at a price greater than the cost of acquiring it. A higher GMROI indicates greater profitability and increased inventory efficiency.

What does a GMROI of 1 mean?

If a retailer’s GMROI ratio is above 1, they are selling that inventory at a higher price than they bought it for, resulting in a profit. A GMROI below 1 indicates they’re selling at a loss — an indicator that profitability is suffering and efficiency needs improvement.

What is a good turn and earn ratio?

Many “best practice” distributors have a turn-earn index above 180. That requires turning over inventory nine times with a 20 percent gross margin or four times with a 45 percent gross margin.

How do I increase my GMROI?

For improving GMROI there are basically 2 main leverages:

  1. Improve gross profit. Raise prices. Reduce COGS. Better management of markdowns.
  2. Improving inventory turnover. increasing sales volumes with the same inventory level. reducing innvetory levels and keeping the same sales volumes.

How do I calculate GMROI in Excel?

The calculation is (gross margin $$)/(average inventory investment $$). For example, let’s say your annual gross margin dollars, or your annual gross profit, is $250,000 and your average inventory value is $200,000, then your GMROI is 1.25 (sometimes GMROI is multiplied by 100, and in this case would be 125).

How can I improve my GMROI?

What is a good inventory turnover ratio for wholesale?

Calculating Inventory Turnover Most companies consider a turnover ratio between six and 12 to be desirable.

What is a good number of inventory turns?

between 5 and 10
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.

What is the ideal inventory ratio?

Optimal inventory levels are the ideal quantities of products that you should have in a fulfillment center(s) at any given time. By optimizing inventory levels, you reduce the risk of common inventory issues, from high storage costs to out-of-stock items.