Formula
Inventory Turnover = Cost of Goods Sold ÷ Average Inventory
Calculation Example
If a company has $500,000 in COGS and $100,000 in average inventory, Turnover = $500,000 ÷ $100,000 = 5 times
Data Source
ERP systems, accounting reports
Tracking Frequency
Monthly, Quarterly
Optimal Value
Higher is better; 5-10 times per year is ideal for most industries.
Minimum Acceptable Value
A low turnover indicates slow-moving inventory.
Benchmark
Industry benchmarks: Retail ~6-10, Manufacturing ~4-8, Automotive ~3-5
Recommended Chart Type
Line chart (to track trends), Bar chart (to compare product lines)
How It Appears in Reports
Displayed in supply chain reports to assess inventory efficiency.
Why Is This KPI Important?
Indicates how efficiently a company manages stock levels.
Typical Problems and Limitations
High turnover may lead to stock shortages and lost sales.
Actions for Poor Results
Optimize supply chain processes, reduce overstocking, improve demand forecasting.
Related KPIs
Cost of Goods Sold (COGS), Order Fulfillment Time, Working Capital
Real-Life Examples
A retailer improved turnover from 4x to 8x by implementing demand-driven restocking.
Most Common Mistakes
Focusing only on high turnover without preventing stockouts.
