Back to Productivity Tips History Page
Stock turnover is a measure of operational efficiency. Specifically, it tells you how many times stock or inventory is being sold and purchased over a given time period. A low turnover rate may point to overstocking, obsolescence, or deficiencies in the product line or marketing effort. A high turnover rate may indicate inadequate inventory levels, which may lead to a loss in business.
What is the 'Norm' for Stock Turns? It varies by industry and comparisons should only be made against similar industries. For example a supermarket sells fast moving consumer goods so the stock turnover will be higher (say) 50; whereas a white-ware Retailer would have a lower turnover of (say) 6. In manufacturing a reasonable Stock Turn would be 8. You should compare your industry's stock turns against other – similar – industries to determine a realistic value. If that cannot be done then simply improve your own Stock Turns to make it as effective as possible.
Stock Turns are calculated in a variety of ways. However, one of the most common ways is to divide total sales COGS by average inventory value.
The formula therefore is:
cTurnover = Total Cost of Goods Sold / Average Inventory
WhereAverage Inventory = (Beginning Stock + End Stock) / 2
If you wish to carry out this function in Ostendo then go to Help>Tutorial and select Stock Turns evaluation. That tutorial will take you through creating a Report to give you the Stock Turn value