What is inventory turnover?

Turnover is the speed gauge for inventory. Divide cost of goods sold by average inventory value and you get the number of times the stock cycled in a year. A turnover of 6 means inventory turned over every two months on average. Higher turnover means less cash sitting on shelves; lower turnover means stock is aging. What counts as good depends entirely on the business. A grocery distributor might turn 15 to 25 times a year. A specialty parts supplier holding slow-moving repair stock might run at 2 to 4 and be perfectly healthy, because the cost of a stockout on a critical part dwarfs the carrying cost. Comparing your number against an unrelated industry benchmark is a waste of a meeting. The more useful move is to compute turnover per SKU or per category, not just for the whole business. The aggregate number hides the story: a few fast movers can mask a back aisle full of dead stock. Per-SKU turnover sorted ascending is a ready-made list of items to discount, return to the supplier, or stop reordering.