What can be a key indicator of effective inventory management?

A high inventory turnover rate is indeed a key indicator of effective inventory management. This rate measures how often inventory is sold and replaced over a period, reflecting the efficiency of inventory control and sales processes. A high turnover rate suggests that a company is selling its products quickly, reducing holding costs, and minimizing the risk of obsolescence. It indicates strong customer demand and effective sales strategies, as well as efficient procurement practices, allowing the business to maintain fresh stock without over-investing in inventory.

In contrast, options such as a low variety of products may limit a company's ability to meet diverse customer needs and preferences, potentially leading to lost sales opportunities. Frequent stockouts indicate an inability to manage inventory effectively, suggesting poor demand forecasting or supply chain inefficiencies. Increased lead times signal delays in receiving inventory, which can hinder the ability to respond to market demands promptly. Therefore, the emphasis is on the high inventory turnover rate as an essential metric for gauging effective inventory management practices.