inventory
Inventory Turnover
How many times inventory is sold and replaced over a period.
Definition
How many times inventory is sold and replaced over a period.
Why it matters
Turns link working capital to sales volume and show how efficiently inventory converts to revenue.
Formula
Cost of Goods Sold / Average Inventory Value
Example
COGS of $12M with average inventory of $3M gives 4 turns per year.
How to interpret it
Higher turns generally mean leaner inventory, but very high turns can signal stockout risk.
How to improve it
Improve forecast accuracy, reduce lot sizes, tighten safety stock policy, and clear excess stock.
Common mistakes
Comparing turns across very different product categories, or using ending instead of average inventory.
Related KPIs
Related SupplyChain.tools
Run the numbers on SupplyChain.tools - this page covers the management decision.
Frequently asked questions
- What is a good inventory turnover?
- It depends heavily on industry and product life cycle; compare against your own trend and close competitors rather than a universal target.
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