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FAQ Vendor Managed Inventory Define Inventory Turns
FAQ Vendor Managed Inventory Define Inventory Turns
| Define Inventory Turns |
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How do you calculate "Inventory Turns"?Inventory Turns are the number of times that a company’s inventory cycles or turns over per year. It is one of the most commonly used supply chain metric.
Calculation: Divide the Annual Cost of Sales by the Average Inventory Level.
Example:
Cost of Sales = $30,000,000.
Average Inventory = $5,000,000.
$30,000,000 / $5,000,000 = 6 Inventory Turns
Turns can be viewed using cost value or even in units. Although results vary by industry, typical manufacturing companies may have 6 inventory turns per year. High volume, Vendor Managed Inventories may have 15+ turns depending on cycle times between replacement shipments. |