Inventory Turnover
What is Inventory Turnover?
Inventory turnover describes how often the average inventory is sold or consumed within a given period.
It is a key metric for evaluating capital tied up in inventory.
How is it calculated?
Formula:
Cost of goods sold ÷ average inventory
Example:
Cost of goods sold: €1,000,000
Average inventory: €200,000
→ Inventory turnover = 5
Benchmarks
- E-commerce: 8–12
- Industry: 4–8
Significance
High inventory turnover means:
- low capital commitment
- fast inventory movement
- efficient processes
Low turnover indicates:
- excess inventory
- weak demand
- inefficient planning
Optimization Opportunities
- assortment optimization
- better forecasting
- reduction of slow movers
- closer alignment with procurement
Typical Mistakes
👉 Too high turnover can also be problematic:
- increased out-of-stock risks
- reduced delivery capability
Relation to other KPIs
- inventory coverage
- inventory availability
- forecast accuracy
Practical Example
A retailer reduces its inventory:
- before: turnover 5
- after optimization: turnover 9
→ significantly reduced capital tied up
❓ FAQ
Is a high inventory turnover always good?
No—it has to be compatible with the delivery capabilities.
How can you increase the turnover?
Through better planning and lower inventory levels.
Conclusion
Inventory turnover is a key indicator of efficiency and capital utilization in the warehouse.
👉 The goal is to balance availability and capital commitment.