Stock turn KPI

Using the stock turn KPI to optimise your inventory management

2 min read


 

For many businesses looking to improve their inventory management, a critical KPI is stock turn. Stock turn (also called stock turnover) is a relatively simple KPI to collect and analyse and can beStock turn KPI very useful as a benchmark for optimising inventory management efficiencies.

What is stock turn?

Stock turn shows how often the stock of a certain SKU is completely sold, used or replaced in a warehouse, during a specified time frame. Stock turn is important because it helps inventory management teams analyse how well they are managing their stock levels. When stock turnover is high this generally means a company is efficient at managing its inventory. When stock turnover is low this usually highlights that replenishment processes are less effective.

 

EazyStock Software KPIs and Reports
 

What’s the formula for calculating stock turn?

There are a number of ways to calculate stock turn, here’s a quick summary. In this example, the cost of goods sold is used as the basis for calculating stock turn:
inventory turnover calculation

To find the average inventory, the most basic formula is:

Calculating inventory turnover

What is a good stock turn rate?

Whilst it depends on the industry, typically companies seek to have a high stock turn rate. This is because the higher the stock turn rate, the less capital there is invested in inventory. A high stock turn also means that SKUs are being regularly sold or used, which typically means that forecasting is accurate.

supply chain managers addressing stock turnHowever, it’s important to keep other KPIs in mind when analysing stock turn. For example, if you have a high stock turn but also a low customer service level, it could mean that you’re not holding enough stock to cover your demand. In this case, it would be better to invest in more SKUs to bring your stock turn down and boost your customer service level.

For companies carrying too many SKUs, it’s important to increase your stock turn so that you don’t tie up money in inventory you don’t need and waste it on carrying costs. One way your stock turnover can be increased is by adjusting your reorder points or reorder quantities. For more details on this and other stock turn tips, read our blog on improving your inventory turnover.

Stock turn KPI

The stock turn KPI helps businesses benchmark how well they are managing their inventory, order fulfillment and warehouse operations. When you combine it with other KPIs, such as service level or sales value, you can paint a full picture of how well your inventory management processes are operating and gain insight into how you can improve your business.

To learn more about what KPIs you can measure and track in your warehouse to improve your inventory management, read our whitepaper:

eBook - A Guide to EazyStock's Key Performance Indicators
 

If you’d like to find out how EazyStock inventory optimisation software can improve your stock turn, contact us on 0121 312 2992 or request a demo.

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