Inventory Turnover

Inventory turnover is calculated by dividing the cost of goods sold (COGS) by the average inventory value during the same period. A turnover ratio of 6, for example, means the company sold and replenished its inventory six times in a year. Higher turnover generally indicates efficient inventory management and strong sales; lower turnover suggests overstocking, weak demand, or obsolete inventory.

Inventory sitting in a warehouse consumes cash, occupies space, and risks obsolescence. In Qatar, where warehouse space comes at a premium and most goods are imported with significant lead times, optimising turnover is a balancing act between having enough stock to avoid stockouts and minimising excess inventory that ties up working capital.

Turnover varies significantly by industry. Fast-moving consumer goods (FMCG) typically see turnover ratios of 8 to 12. Electronics and fashion may range from 4 to 8. Heavy industrial goods and spare parts often have lower turnover. Monitoring turnover by SKU category helps identify products that need promotional action, reorder adjustments, or discontinuation.