The Stock turn rate, also called inventory turnover or stock rotation rate, is a key figure in inventory management that expresses how many times per year the stock of an item is renewed.
The inventory turnover is calculated by dividing the annual turnover or annual consumption value by the current or average stock level at the time of calculation. To determine the annual turnover or annual consumption value, the last 12 months are typically used on a rolling basis.
The average value of inventory turnover, calculated over all items of a company, is 7.5 and the median 5.3 according to A&K’s inventory benchmark database. 25% of the best companies have a stock turn rate above 8.5, the worst quarter of the companies is below an inventory turnover of 3.8.
Our recommendation with stock turn rate:
In order to avoid comparing apples (= stock issue quantity at sales prices) with pears (= stock at production costs), you should form the turnover rate from the quotient of the consumption value (= stock issue quantity * production costs) and the stock.
If the stock turn rate is calculated from the rolling figures of the past 12 months, the ratio is sluggish. To show developments more dynamically, you should consider a rolling three-month view. In this case, you should calculate the denominator with the average stock level of the last rolling three months and form it at least from the three month closing stocks, better from the weekly or daily closing stocks.
