💶 Understanding Turnover Time (Inventory Velocity)
Turnover Time is a financial metric visible on your Optiply dashboard that helps you assess the quality of your inventory.
While other metrics focus on logistics (how many units do I have?), Turnover Time focuses on capital efficiency. It essentially tells you "how long a euro has been sitting on the shelf" before it is converted back into cash.
How It Is Calculated
Turnover Time is determined by dividing the average inventory value by the sales performance over the past month.
Key Characteristics:
Financial Focus: It looks at the value of the stock, not just the quantity.
Retrospective: It looks at past sales and existing inventory.
Demand Excluded: Unlike forecast-based metrics, Turnover Time does not take expected future demand into account. It is purely a measure of historical efficiency.
Interpreting the Score
This metric is a direct indicator of financial health.
Lower Score: A lower turnover time is generally better. It means your inventory is moving fast, and your cash is not tied up on the shelf for long periods.
Alignment: However, the score must be aligned with your supply chain length.
Example: If your Supplier Lead Time is 30 days, having a Turnover Time of 5 days is risky (you might be selling too fast to restock). Ideally, your turnover time should be efficient but sustainable, given your lead times.
❓ Frequently Asked Questions (FAQs)
What is the difference between Stock Time and Turnover Time?
Stock Time (Logistics): Forward-looking. Uses Forecast (future demand) to predict when you will run out of units.
Turnover Time (Financial): Backwards-looking. Uses Past Sales and Inventory Value to measure how efficiently you used capital over the last month.
Is a higher Turnover Time ever good?
Generally, no. A high turnover time means you are holding stock for a long time before selling it, which ties up cash flow and increases storage costs. However, you might intentionally accept a higher turnover time for strategic reasons, such as buying in bulk to secure a discount.
Does this metric include all products?
The dashboard metric typically aggregates the value of your entire assortment to give you a high-level view of your business's inventory health.