Inventory turnover: understand what it is and why you should monitor this indicator

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Has your company ever lost stock due to lack of sales? Or worse, have your customers stopped buying from your store because they couldn't find what they were looking for? Well, this problem affects many companies and can be solved in a simpler way than it seems.

Want to know how? Then keep reading this article and understand everything about inventory turnover!

What does inventory turnover mean for your company?
Basically, inventory turnover is a tool that analyzes and portrays the economic health of the merchandise warehouse, providing crucial information for the managers' decision-making process.

In a simple and efficient way, inventory turnover allows you to understand the current situation of your company's resources and, from there, identifies which goods are best to sell and which should remain in stock for longer.

Therefore, regardless of the company's niche, inventory turnover is a ios database tool for understanding the speed at which stored products are renewed and, consequently, reducing costs and optimizing spending.

How to control inventory turnover?
Inventory turnover can represent much more than you might think. If management neglects this metric, the company can suffer major losses, especially if it sells products that need to be sold quickly, such as perishables or seasonal clothing collections.

Having a low inventory turnover means that your goods remain unused and stored for longer. Therefore, if there are no processes that prioritize the removal of these unused goods, the business could suffer major losses due to spoiled items, for example.

Furthermore, stockpiling merchandise has a high cost of conservation, storage and cleaning. Therefore, in addition to being harmful in terms of loss and disposal of products, it significantly affects the budget with such storage costs.

How to calculate inventory turnover?
The formula for calculating inventory turnover is simple. To calculate it, you will first need to determine the calculation period. Generally, the period considered is one year. However, this period may vary depending on the expiration dates of the products.

Once you have established the analysis period, you will need to gather some more information. The first is to find out the total number of products sold during the analysis period. The other number you will need is the average volume of goods in stock during the period.