3M Company (MMM)

Inventory turnover

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Cost of revenue	US$ in thousands	14,447,000	14,983,000	19,232,000	18,795,000	16,605,000
Inventory	US$ in thousands	3,698,000	3,944,000	5,372,000	4,985,000	4,239,000
Inventory turnover		3.91	3.80	3.58	3.77	3.92

December 31, 2024 calculation

Inventory turnover = Cost of revenue ÷ Inventory
= $14,447,000K ÷ $3,698,000K
= 3.91

To analyze 3M Company's inventory turnover, we look at the ratio of cost of goods sold to average inventory for a given period. The data provided shows a slight decline in inventory turnover over the years, with the ratio decreasing from 3.92 in December 31, 2020, to 3.77 in December 31, 2021, further declining to 3.58 by December 31, 2022. However, there was a slight improvement in inventory management as the ratio increased to 3.80 by December 31, 2023, and then to 3.91 by December 31, 2024.

A lower inventory turnover ratio may indicate either excessive inventory levels or slowing sales, which could tie up working capital and lead to potential obsolescence or carrying costs. Conversely, a higher ratio typically suggests efficient inventory management and faster sales turnover.

In the case of 3M Company, the decreasing trend in inventory turnover from 2020 to 2022 warrants attention as it might signify challenges in effectively managing inventory levels or potential issues with sales performance. However, the subsequent improvement in inventory turnover from 2023 to 2024 suggests a positive shift in inventory management practices, leading to a healthier balance between inventory levels and sales turnover.

It would be beneficial for 3M Company to further investigate the factors contributing to the fluctuations in inventory turnover to make informed decisions regarding inventory management strategies and overall operational efficiency.