Inventory management planning and controlling inventories: some sort of system to plan for and manage these stocks. Indicates how many times a year the inventory is sold or used. Ratio of annual costs of goods sold to average inventory value/investment. Higher number = better implies more efficient use of inventories. Usually done on an annual basis: monthly or quarterly tr calculations are subject to seasonality and the purchase of low volume expensive inputs which can distort results. Allows for comparison to other firms in similar sectors. Functions of inventories: to wait while being transported. Raw materials/parts from suppliers and finished goods from manufacturers heading to markets need to be transported. Items being transported are called in-transit inventory: to protect against stock-outs. Delayed deliveries from suppliers (weather conditions, quality problems, etc. ) and unexpected increases in customer demand increase risk of stock-outs.