Stock-to-sales method

One of the methods used by big retailers for planning inventory level. In this inventory level-planning technique a specified ratio of goods on hand to sales is maintained. This method is easy to use but requires the retailer to have a beginning-of-the-month stock/sales ratio. This ratio tells the retailer how much inventory is needed at the beginning of the month to support the month’s estimated sales. Stock/sales ratios can be obtained from internal or external sources.