The Procurement Glossary » Inventory Turnover
Inventory Turnover
Inventory & Logistics
Definition
How many times inventory is sold or used and replaced over a period — a measure of inventory efficiency.
Explanation
High turnover means stock moves quickly, tying up less cash; low turnover signals overstocking or slow-movers. It is a key working-capital and supply-chain health metric, benchmarked by industry.
Example
Inventory turnover of 8 means stock cycles roughly every six weeks.
Related terms
- Inventory Carrying Cost — The total cost of holding inventory — capital tied up, storage, insurance, obsolescence and shrinkage.
- Working Capital — The money tied up in day-to-day operations — broadly current assets (inventory, receivables) minus current liabilities (payables).
- Days Inventory Outstanding (DIO) — The average number of days inventory is held before it is used or sold.
- Inventory — The goods and materials a business holds for use, sale or production.
Frequently Asked Questions
What is Inventory Turnover?
How many times inventory is sold or used and replaced over a period — a measure of inventory efficiency. High turnover means stock moves quickly, tying up less cash; low turnover signals overstocking or slow-movers. It is a key working-capital and supply-chain health metric, benchmarked by industry.
Can you give an example of Inventory Turnover?
Inventory turnover of 8 means stock cycles roughly every six weeks.
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