If you’ve come across inventory stock turnover while tracking your warehouse or retail performance, it’s one of those useful terms that tells you a lot about your business speed.
Let’s go over what it means and why it matters.
What is Inventory Stock Turnover?
Inventory stock turnover shows how many times you sell and replace your inventory over a certain period, usually a year. It’s a quick way to understand how fast products move through your business.
Faster turnover means you’re selling efficiently. Slower turnover could point to overstocking or slower demand.
How to Calculate It: Inventory Turnover Formula
You can easily calculate it using the inventory turnover formula, which is:
Inventory Turnover = Cost of Goods Sold ÷ Average Inventory
For example, if you sold $500,000 worth of products in a year and kept an average of $100,000 in stock, your turnover rate is 5. That means you sold and replaced your stock five times in a year.
What Is a Good Inventory Turnover Ratio?
People often ask what is a good inventory turnover ratio; the answer depends on your industry.
Retailers selling fast-moving goods may aim for 6-8, while businesses with bulkier products like furniture might have a lower ratio around 3-4. A good turnover rate balances product availability without tying up too much cash in stock.
Why Inventory Stock Turnover Matters
Keeping an eye on inventory stock turnover helps you:
- Avoid overstocking
- Free up cash flow
- Reduce storage costs
- Spot slow-moving products early
It’s a simple tool that gives you insights to make smarter buying and selling decisions.
Final Thoughts
Inventory stock turnover keeps your warehouse lean and your sales strong.
At Teamship, we help you track, manage, and optimize inventory flow using simple tools that make life easier, so you can focus on growing your business without the guesswork.
Reach out for a quick call.
Frequently Asked Questions
1. Does inventory turnover include damaged goods?
No, inventory turnover calculations only count products that are sold, not damaged or written-off items.
2. How often should businesses check inventory turnover?
Most businesses track it monthly or quarterly, especially if they deal with seasonal products or fast-moving inventory.
3. Is higher turnover always better?
Not always. Too high a turnover could lead to frequent stockouts, which could risk disappointing customers.