Thanks for clearing up a general misconception. I myself used the term incorrectly for a while, then realized the difference – as you put it so clearly – and now I make sure to stress the distinction so others will not have the same confusion I did. In manufacturing, it may be self-evident, but in a service industry without automated / regulated flow, the terms are similar enough that its easy to be confused if you dont start with a good definition. Thanks for giving us that and a good example as well,
He serves on the advisory board of a number of technology startups, and has consulted to new and established companies as well as venture capital firms. In 2010, he was named entrepreneur-in-residence at Harvard Business School and is currently an IDEO Fellow. Previously he co-founded and served as CTO of IMVU, his third startup. In 2007, BusinessWeek named him one of the Best Young Entrepreneurs of Tech. In 2009, he was honored with a TechFellow award in the category of Engineering Lean Startup methodology has been written about in The New York Times, The Wall Street Journal, Harvard Business Review,Inc. (where he appeared on the cover), Wired, Fast Company, and countless blogs. He lives in San Francisco.
Inventory Turns : How many times you can "Turn" your money over in a year. This is expressed as a ratio of the total inventory to the annual sales. Example: If the dollar value of the inventory (a number that probably must be reported to both your banker and the government) is $5,000,000 and the annual sales is $25,000,000 the inventory turns is five. If the inventory can be reduced to $1,000,000 the inventory turns become 25. Increasing your inventory turns may require a paradigm shift by your banker who may think inventory is something of value rather than MUDA.