Turnover Rate
The turnover rate measures how quickly a company sells its inventory or converts its assets into revenue. It is a central key figure in supply chain and inventory management, as it shows the efficiency of inventory holding and capital utilization.
What is turnover rate?
Inventory turnover is a key concept in supply chain and inventory management, as it shows how often a company sells and replaces its inventory during a period - usually a year. A high inventory turnover typically means efficient inventory management and low capital tied up (as long as it is not too high), while a low turnover can indicate that goods are sitting too long in stock and sales are slow.
Why measure turnover rate?
Turnover rate is used to:
- Assess how effectively products are sold and inventory is replaced.
- Identify slow-moving items that tie up unnecessary capital.
- Optimize inventory levels and liquidity.
When is turnover rate used?
The concept is used continuously in inventory and financial management, especially for:
- Analysis of inventory performance
- Planning of reorders and product portfolio
- Evaluation of supply chain efficiency