Free tool
Inventory turnover calculator
Turnover tells you how many times a year your shelf sells through. Days of supply says the same thing in a unit you can act on — and it is usually the one worth quoting in a meeting.
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Two numbers, one idea
Turnover of 6 means you sold through your average stockholding six times in the year. Days of inventory outstanding converts that into "about 61 days of stock on hand", which is the version people can actually reason about — and the version that makes the cash implication obvious.
Use cost, not revenue
The single most common error is dividing sales by average inventory. Inventory is carried at cost, so putting revenue on top inflates the ratio by your entire gross margin. A business with a 40% margin that uses revenue will report turnover roughly 1.7× its real figure and conclude it is running lean when it is not.
What counts as good
There is no universal target — turnover is a property of the sector far more than of the management. Rough ranges:
| Sector | Typical annual turnover | Days of supply |
|---|---|---|
| Grocery and fresh food | 12–25× | 15–30 days |
| Fast fashion and apparel | 4–8× | 45–90 days |
| General retail | 4–8× | 45–90 days |
| Consumer electronics | 6–10× | 35–60 days |
| Wholesale and distribution | 5–10× | 35–75 days |
| Auto and industrial spares | 2–4× | 90–180 days |
| Jewellery and luxury | 1–2× | 180–365 days |
Compare yourself with your own past figures and with your sector — never with a number from an unrelated industry. A spares business at 3× may be extremely well run; a grocer at 3× is in serious trouble.
Higher is not always better
Rising turnover usually means less cash tied up and less obsolescence risk, which is good. Pushed too far it means you are running thin, and thin shows up as stockouts, expedited freight, more frequent ordering and lost sales — none of which appear in the turnover number itself.
That is why turnover should always be read next to a service-level or stockout measure. Turnover alone can be improved by simply refusing to hold stock, which is not an improvement.
The trap of the blended figure
A single company-wide turnover figure hides the thing you most need to see. A business turning over 6× overall may consist of fast lines turning 20× and dead stock turning 0.3×, and the average tells you nothing about either. Calculate it per category, and read it alongside an ageing report to find what is not moving at all.
ABC analysis is the natural complement: it identifies which lines carry the value, and turnover then tells you how fast that value is cycling.
Moving the number honestly
- Clear dead stock deliberately — discount, bundle, return or write it off. It is already a loss; carrying it just extends the payment.
- Order smaller and more often where EOQ supports it.
- Cut lead times. Shorter lead times mean less safety stock for the same service level, which raises turnover without raising risk.
- Prune the tail. Lines that sell twice a year rarely earn their shelf space or their working capital.
Questions
What is a good inventory turnover ratio?
It depends almost entirely on sector. Grocery often runs 12–25× a year, general retail 4–8×, wholesale 5–10×, and spares or jewellery 1–4×. Compare against your own history and your sector rather than a universal target.
Should I use sales or cost of goods sold?
Cost of goods sold. Inventory is carried at cost, so using revenue inflates the ratio by your entire gross margin and makes the business look leaner than it is.
What is days of inventory outstanding?
Days in the period divided by the turnover ratio — the number of days of stock you are carrying. Turnover of 6 over a year is about 61 days of supply.
Is a higher turnover always better?
No. Beyond a point high turnover means running thin, which shows up as stockouts, expedited freight and lost sales that the ratio itself does not capture. Read it alongside a service-level measure.
How do I improve inventory turnover?
Clear dead stock deliberately, order in smaller and more frequent quantities where EOQ supports it, shorten lead times so less safety stock is needed, and prune slow-moving lines that do not earn their working capital.
Stop recalculating this by hand every month
SmartShelfKart keeps a reorder point on every product and watches it against live stock, so the number you just worked out becomes an alert instead of a spreadsheet you forget to update.