What Is a Good Inventory Turnover Ratio?
Inventory turnover ratio is one of the most important metrics in wholesale, retail, and distribution. It shows how many times your inventory is sold and replaced over a certain time period—usually monthly, quarterly, or annually.
But many operators and inventory managers often ask: what is a good inventory turnover ratio?
The answer depends on several factors, such as your industry, the types of products you sell, how seasonal your inventory is, and your overall supply chain model.
How Inventory Turnover Ratio Impacts Distributors‘ Decision-Making
Inventory turnover ratio directly shapes how distributors manage stock, cash flow, and supplier relationships. For example, a distributor handling bottled water and soft drinks — products with steady year-round demand — uses a high turnover ratio as a signal to place larger, more frequent orders and avoid stockouts. In contrast, for slow-moving seasonal goods like Christmas lights, a low turnover prompts immediate actions like early discounts or bundling to clear inventory before demand drops.
A real-world case is Walmart: when it noticed slower turnover in non-essential categories during economic downturns, it shifted to smaller, more frequent shipments focused on fast-moving essentials like groceries. This change reduced carrying costs, improved cash flow, and strengthened Walmart’s resilience during market volatility.
Ultimately, inventory turnover isn’t just a performance metric — it’s a daily decision-making tool that helps distributors protect margins, free up capital, and align operations with real demand.
General Guidelines for a Good Inventory Turnover Ratio
A “good” inventory turnover ratio is one that reflects:
- Efficient use of capital
- Minimal excess stock
- Consistent product availability
- Healthy sales velocity
While the ideal range varies, here are some common benchmarks:
| Industry/Product Type | Good Inventory Turnover Ratio |
| Fast-moving consumer goods (FMCG) | 6 to 12+ |
| Wholesale distribution | 4 to 8 |
| Fashion and apparel | 3 to 6 |
| Electronics and durable goods | 4 to 6 |
| Luxury and seasonal products | 1 to 3 |
A low turnover ratio might mean you’re overstocked, tying up capital in products that aren’t selling. A very high turnover ratio could mean you’re understocked and potentially losing sales due to frequent stockouts.
Why Inventory Turnover Ratio Matters in Wholesale Distribution
In B2B wholesale and distribution, inventory is one of your biggest operational costs – and biggest opportunities for savings. A strong inventory turnover ratio means:
- 📦 Less capital locked in inventory
- ⚡ Faster reaction to market demand
- 📉 Reduced risk of inventory obsolescence
- ✅ More accurate forecasting and planning
- 🔁 Smarter purchasing and replenishment
For businesses working with distributors, retailers, or direct-to-store delivery, improving turnover can also create more agility in your supply chain—so you can respond faster to sales trends, promotions, and shifts in customer demand.
How to Calculate Inventory Turnover Ratio
The formula is straightforward:
Inventory Turnover Ratio = Cost of Goods Sold (COGS) / Average Inventory
Example:
If your annual COGS is $1,200,000 and your average inventory value over the year is $200,000: → $1,200,000 / $200,000 = 6
This means you sold and replaced your inventory six times in a year.
You can also calculate monthly or quarterly turnover depending on your business cycles. The key is consistency—track the same way every time to spot trends.
What Impacts Inventory Turnover?
Several factors influence your turnover ratio, including:
- 📊 Sales volume – More sales mean higher turnover
- ⏱️ Lead time – Longer lead times require higher stock buffers
- 📦 SKU assortment – A larger catalog can lower average turnover
- 🧊 Seasonality – Winter gear in summer = low turnover
- 🚫 Dead stock – Obsolete inventory drags the average down
- 💡 Demand forecasting accuracy – Better planning = better turnover
That’s why SKU-level data and order visibility are so critical for B2B teams.
How SimplyDepo Helps You Optimize Inventory Turnover
At SimplyDepo, we help brands and distributors take control of their inventory performance with tools designed for real-time visibility, SKU-level insights, and smarter decision-making.
Whether you’re managing hundreds of SKUs or scaling up your distribution network, SimplyDepo gives you the power to improve your turnover ratio with:
🧠 Data-Driven Product Management
Track fast- and slow-moving SKUs using our Sales Performance Insights. Identify which products contribute to poor turnover—and which deserve more attention or marketing push.
📲 Real-Time Order Visibility
Use the SimplyDepo Field Sales App to receive orders directly from your sales reps. Reduce lags between demand and supply by aligning purchase cycles with on-the-ground sales activity.
📦 Centralized Catalog Control
Organize all your SKUs, update pricing, and manage pack sizes in one place via the Web App Product Catalog. This ensures accuracy and avoids errors that lead to overstock.
🚚 Smarter Delivery Planning
Reduce unnecessary warehouse holding by aligning your stock availability with optimized delivery routes. Faster replenishment = better turnover.
With SimplyDepo, your inventory becomes leaner, faster, and more responsive—just the way modern distribution should be.
