What are inventory turns?
A. Inventory turnover is not a pastry nor a term used by someone who is really high tech, not like the rest of us dummies. Rather it is something we who are in the business of logistics should really understand, although I must admit it took me a little while to comprehend myself. The explanation I am going to use is not the same for inventory turns used in a financial environment which uses a method is to divide the Annual Cost of Sales by the Average Inventory Level. Example: Cost of Sales = $36,000,000. Average Inventory = $6,000,000. $36,000,000 / $6,000,000 = 6 Inventory Turns What I am trying to explain here is the calculation of inventory turns quantified in quantity form, i.e. actual units of inventory. To calculate physical inventory turns we must understand and use three basic concepts: Average Inventory = Average Inventory equals beginning inventory or ending inventory divided by 2. Throughput = Throughput equals receipts plus shipments divided by 2. Turnover = Throughput di
