Side Hustle

Inventory Turnover Calculator

Calculate your inventory turnover ratio, days of stock on hand, annual holding cost, and reorder point — with industry benchmark comparisons.

Annual COGS ($) Cost of goods sold over 12 months (or monthly × 12)

Average Inventory Value ($) (Beginning inventory + Ending inventory) ÷ 2

Holding Cost % of Inventory Value Storage, insurance, spoilage, capital cost (typically 20–30%)

Stockout Cost Estimate ($/year) Lost sales + rush ordering + customer damage from stockouts

Reorder Lead Time (days) Days from placing order to receiving stock

Daily Sales Rate (units)

Safety Stock (days of supply) Buffer days of stock to prevent stockouts

Target Turnover Ratio Your inventory turnover goal (see benchmarks below)

Inventory Turnover Ratio

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Days Inventory Outstanding

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Annual Holding Cost

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Reorder Point (units)

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Ideal Inventory Value

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Total Carrying Cost/Year

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Understanding Inventory Turnover

Inventory turnover measures how many times you sell through your average inventory level in a year. Higher turnover means better cash flow, lower holding costs, and fresher product. Low turnover means capital is sitting idle on shelves.

eCommerce (general): 8–12x per year target
Retail (apparel/gifts): 4–6x per year
Grocery / Perishables: 12–25x per year
Fashion / Seasonal: 4–6x (1–2x = slow-moving problem)
Electronics: 6–10x per year

Inventory Turnover = Annual COGS ÷ Average Inventory Value
Days Inventory Outstanding (DIO) = 365 ÷ Inventory Turnover
Annual Holding Cost = Average Inventory Value × Holding Cost %
Reorder Point = (Daily Sales × Lead Time Days) + Safety Stock
Ideal Inventory = Annual COGS ÷ Target Turnover

What is a good inventory turnover ratio?

It depends heavily on your industry. eCommerce sellers should target 8–12x annually, which means selling through average inventory every 30–45 days. Retail stores typically run 4–6x (60–90 days). A ratio below 4x for most product businesses indicates excess inventory, slow-moving products, or poor demand forecasting. A ratio above 15x can indicate you're understocked and potentially losing sales due to stockouts.

How do I calculate my reorder point?

Reorder Point (ROP) = (Average Daily Sales × Supplier Lead Time in Days) + Safety Stock. Example: if you sell 25 units/day and your supplier takes 14 days, you need 350 units on hand when you reorder. Adding 7 days of safety stock (175 units) gives you an ROP of 525 units. When your stock level hits 525 units, place your next order — this ensures you don't stock out during the lead time while maintaining a buffer for demand spikes.