Inventory Turnover

A practical example

Example: a retailer with 400,000 in annual cost of goods sold and 100,000 in average inventory turns stock four times a year.

A slow-moving luxury line inside that same business may turn once, which the blended figure hides.

What to evaluate before investing

• Can the metric be calculated per SKU, category, and location rather than only as a company-wide average?
• Does the tool let you choose the period and the averaging method, such as opening and closing versus monthly averages?
• Can turnover be viewed alongside stock cover or days of supply so the number is actionable?

Limitations and tradeoffs

A high turnover figure can reflect lean operations or chronic stockouts; without stockout context, the ratio alone cannot tell you which.