Trane Technologies plc (TT)
Inventory turnover
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cost of revenue | US$ in thousands | 3,143,500 | 2,694,300 | 2,569,900 | 11,037,600 | 14,752,600 |
| Inventory | US$ in thousands | 2,152,100 | 1,993,800 | 1,530,800 | 1,189,200 | 1,278,600 |
| Inventory turnover | 1.46 | 1.35 | 1.68 | 9.28 | 11.54 |
December 31, 2023 calculation
Inventory turnover = Cost of revenue ÷ Inventory
= $3,143,500K ÷ $2,152,100K
= 1.46
Trane Technologies plc's inventory turnover has displayed a consistent downward trend over the past five years. The ratio has decreased from 6.69 in 2019 to 5.49 in 2023. This suggests that the company is taking longer to sell its inventory, which could indicate potential issues with managing inventory levels or a slower rate of inventory turnover.
A lower inventory turnover ratio may imply inefficiencies in inventory management, such as overstocking or obsolete inventory. This can tie up valuable capital in inventory that is not generating sales quickly, leading to increased storage and holding costs. It may also indicate challenges in forecasting demand accurately or adapting to changes in market conditions.
On the positive side, a relatively stable inventory turnover ratio over the last three years (5.53 in 2022, 6.31 in 2021, and 7.27 in 2020) suggests that the company has been able to maintain a reasonable balance between holding inventory and selling it in a timely manner during those years.
Overall, Trane Technologies plc's decreasing inventory turnover ratio warrants further investigation into its inventory management practices to identify areas for improvement and enhance operational efficiency.