Hi j_shreyans,

There are two problems with answer D. The first is the placement of the verb "is."

(D) how frequently is the inventory turned over are often <--- incorrect

To be correct, "is" needs to be placed between inventory and turned, because it is the inventory which is being turned over.

(D) how frequently the inventory is turned over are often <--- correct BUT...

We need commas to offset the second clause, as follows:

It is well known in the supermarket industry that how items are placed on shelves, and how frequently the inventory is turned over, are often crucial to profits.

This modified sentence says, "It is well known that X and Y are crucial to profits." The commas help clarify the sentence, because the first part is plural (items are) and the second part is singular (inventory is).

C and D has redundancy. Frequency and Often are not needed.
GMAT usually gives more than one option to eliminate the choices.

It is well known in the supermarket indeustry that how items are placed on shelves and the frequency of inventory turnovers can be crucial to profits.
a. the frequency of inventory turnovers can be
b. the frequency of inventory turnovers is often
c. the frequency with which the inventory turns over is often
d. how frequently is the inventory turned over are often
e. how frequently the inventory turns over can be

In A, B and C, how items are placed is not parallel with the frequency. Eliminate A, B and C.

In D, the structure how + to be + subject implies a question:
how frequently IS the inventory turned over?
To make a statement, the structure needs to be how + subject + verb, as in answer choice E:
how frequently the inventory TURNS OVER.
Eliminate D.

The correct answer is E.

In this context, to turn over means to be sold and restocked.