Inventory Turns

The number of times you can “Turn” (use and replace) your inventory/money over in a year.

Comments: This is a bit of a tough concept for many people so we will use a very basic explanation:

If your company holds $1000. worth of inventory every month and consumes $1000. worth of inventory every month that would equal “12 Inventory Turns per year.”

The “real world” is not as “clean” as the example above, and it can be challenging to “know” how many times each year you “turn” your inventory.

Some companies will speak of inventory turns specific to individual parts or materials, i.e., “We turn our raw widget parts every week, or “We have 24 turns a year on our coiled steel.”

The real message behind Inventory Turns is to keep enough inventory on-hand to satisfy your customers but not so much that it winds up collecting dust and costing you money in the form of lost interest, damage, obsolescence, storage space, moving it around, etc.