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Manufacturing KPI Dictionary
Inventory Turnover: definition, formula and manufacturing interpretation
Understand inventory turnover and how to use it in manufacturing analysis.
Inventory Turnover
Inventory Turnover
Formula: COGS ÷ average inventory
Use the KPI with product, plant, customer, supplier and period context where appropriate. Connect changes to operational and financial drivers.
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Practical interpretation and manufacturing use
Inventory turnover measures how efficiently inventory is converted into cost of goods sold over a period. Low turnover can signal excess, obsolete or slow-moving inventory, while very high turnover may create service or production risk.
Formula
Inventory Turnover = Cost of Goods Sold ÷ Average Inventory
How to use this KPI
- Segment turnover by SKU, location, product family or inventory type.
- Investigate demand, purchasing, production and lead-time drivers behind slow movement.
- Balance inventory efficiency against production continuity and customer service.