Inventory Turns

Inventory turns measure how quickly materials move through a facility or an entire value stream. The most common calculation divides the annual cost of goods sold by the average value of inventories held during the year. The result is expressed as the number of turns, and it is used to track lean improvement over time.

Source checked6/6 values · 2026-10-25Metric

Specification

1 source

Kind	metric

Formula

Inventory turns = COGS / I_avg

Symbol	Name	Unit
COGS	Annual cost of goods sold	currency
I avg	Average value of inventories on hand during the year	currency

Study notes

Using cost of goods sold rather than sales revenue removes variation caused by selling-price fluctuations in the market.
Using an annual average of inventories rather than an end-of-year figure removes artificial year-end inventory reductions made to show good numbers.
Turns decline as the length of the value stream included in the calculation grows, even if every step is equally lean.
Example given: an assembly-only plant may show turns of 100 or more; adding supplying parts plants often brings turns to 12 or fewer; including materials back to initial conversion (steel, glass, resins) often brings turns to four or fewer.
Cost of goods sold at the most downstream step does not change as more facilities are added, but the amount of material held in inventory grows.
The rate of increase in turns, not the absolute number of turns at a facility or value stream, is the useful measure of a lean transformation.
The Building a Lean Fulfillment Stream workbook recommends Average Days on Hand (ADOH) instead; ADOH is the number of days a process could sustain activity by consuming its stored inventory.
ADOH example: an item with a four-day order-to-delivery lead time but 20 days on hand has five times as much inventory as needed.