Summary
This article walks through what inventory turnover is and how various turn values are calculated.
Applies To
All items in StockIQ
Process
Turns, or Inventory Turnover, is a measurement of how often each year you are completely going through a set of inventory. It allows you to have a measure of the velocity of product through your warehouse, and is a good guidepost of the efficiency of the inventory - high turns means high volume and/or low stock required to achieve that volume, whereas low turns means the inventory is either moving slowly, or is requiring a large inventory investment to create that sales volume.
Turns is always reported as an annualized quantity (e.g. annual turns) unless labeled otherwise. If you have a non-annual numerator, such as a monthly, quarterly, or weekly COGS or Quantity Sold that you might see in the Turns Screen, then you can annualize your number by doing the following:
Annualized Value = (365/Measurement Period Days) * Value
for example to annualize a COGS from July (31 days), you would do:
Annualized COGS = (365/31) * (Monthly COGS)
Current Turns:
Turns based on current on hand balance, and COGS over measurement period (e.g. month, week, quarter, etc.).
Current Turns = COGS / Current OH$.
Unit Turns:
Turns based off of on hand quantity and quantity sold over the measurement period. This only makes much sense at an item level for most businesses, whereas turns calculated using dollar values can apply at aggregate levels such as product group or site combinations.
Unit Turns = Qty Sold / Current OH Qty.
Average Turns:
Turns based on average on hand balance and Cogs over measurement period. This one is more useful broadly, since current turns can be skewed if the business is currently a bit over or under on a part.
Average Turns = COGS / Average Inventory Value
Target turns:
Turns based on Target Stock Quantity and the associated value based on your Standard Cost. Target Stock is calculated as part of your safety stock calculations.
Target Turns = COGS / Target Inventory Value