Inventory Turnover measures how quickly inventory sells and is replenished. It helps operators understand whether cash is tied up in stock or moving efficiently through sales.
Formula: Inventory Turnover = Cost of Goods Sold / Average Inventory Value
Why It Matters
Low turnover can signal overstock, slow movers, high storage fees, or weak demand. Very high turnover can mean the seller is understocked and at risk of stockouts.
How To Improve It
Improve forecasting, reduce reorder quantities for slow movers, liquidate stale SKUs, and align purchasing with seasonality.