What is the turnover rate?
The inventory turnover rate is a key figure in logistics warehousing. It describes how often a product or item leaves the warehouse / is sold in a certain period of time. This key figure is usually extrapolated to one year. The turnover rate forms the basis for companies' purchasing strategies and the optimization of goods storage.
This is how the turnover rate is calculated
The turnover rate is calculated as follows:
- Revenue from stock / average capital tied up = inventory turnover rate
- Goods handled (total) / average stock on hand = inventory turnover rate
For example, if a company has revenues of EUR 400,000 per year with average capital employed of EUR 80,000, the turnover rate is five. This means that the entire stock is sold five times a year and replaced with new stock.
Since the storage of goods ties up capital and also involves costs, a high turnover rate should be aimed for. The higher this figure is, the shorter the storage period and therefore the lower the costs.
