Inventory Turnover Calculator
Measure your inventory efficiency and optimize stock levels
Financial Disclaimer: This calculator provides general estimates only. For complex inventory situations or financial decisions, consult with a qualified accountant or supply chain specialist.
Tip: Compare your results with industry benchmarks for better context. Retail typically has 6-12 turns/year, while manufacturing may be 3-5 turns.
Inventory Analysis
Turnover Ratio:
Days in Inventory:
Annualized Turns:
0.00
0 days
0.00
Inventory Health: Balanced
Management Recommendations:
- Consider reducing safety stock levels for fast-moving items
- Review slow-moving inventory for potential discounts
Understanding Inventory Turnover
High Turnover
- Indicates strong sales or effective inventory management
- Reduces holding costs and obsolescence risk
- May lead to stockouts if too high
Low Turnover
- May indicate overstocking or weak sales
- Increases storage costs and capital tied up
- Higher risk of product obsolescence
"Businesses optimizing inventory turnover typically see 15-30% reductions in carrying costs while maintaining 98%+ service levels through better forecasting."
Industry Benchmark Comparison
| Industry | Avg. Turnover | Good Range |
|---|---|---|
| Retail (General) | 8-10 | 6-12 |
| Grocery | 14-16 | 12-20 |
| Automotive | 3-4 | 2-6 |
| Manufacturing | 4-6 | 3-8 |
Note: Benchmarks vary by product category even within industries. Perishable goods naturally have higher turnover than durable goods.
Frequently Asked Questions
What's a good inventory turnover ratio?
The ideal ratio varies by industry. Generally, higher is better (indicating efficient inventory management), but too high may suggest inadequate stock levels leading to lost sales. Compare your ratio to industry benchmarks for context.
Should I use cost of goods sold or sales in the calculation?
Always use cost of goods sold (COGS) rather than sales revenue. COGS reflects the actual inventory cost, while sales include markup which would distort the ratio. Using sales would make your turnover appear artificially high.
How do I calculate average inventory?
Average inventory is typically calculated as: (Beginning Inventory + Ending Inventory) ÷ 2. For more precision, use monthly averages if your inventory fluctuates significantly.
What causes low inventory turnover?
Common causes include over-purchasing, poor demand forecasting, ineffective marketing, seasonal mismatches, or carrying obsolete items. Analyze your product mix to identify specific issues.
How can I improve my inventory turnover?
Strategies include: better demand forecasting, smaller/more frequent orders, promotions for slow-moving items, supplier partnerships for quick replenishment, and ABC analysis to focus on top sellers.