In the over 20 years we’ve been helping dealerships optimize their inventory one thing has always proven to be true: a data-driven inventory is a successful inventory. Calculating your parts inventory turns is fundamental for creating a healthy, profitable inventory. Finding your inventory turns can be simple or complex, depending on your DMS. Here are the basic calculations to get you the number you need.
How to Calculate your Inventory turns
Your inventory turns are a ratio that expresses how often your entire inventory is completely sold in a year (though some parts may stick on shelves longer than a year, another great reason to keep a handle on your obsolete inventory). To calculate this, you divide your
Cost of Goods Sold into your Month End Close Inventory Value.
What next?
Dealership turns can vary. Factors such as manufacturer, sales volume, or the amount of idle capital in inventory will often bring the turns higher or lower! The gold standard number is to be somewhere between 6 to 8 inventory turns per year. Less slow-moving inventory means less capital wasted and fewer parts catching dust on shelves. To improve your turns, keep an eye on your fill rate. Your fill rate tells you which sales come from inventory vs. all requested parts. Bringing your fill rate up automatically helps your turns as it means the parts you have been selling.
Learn more about how to increase your fill rate on our blog. If you’d like some assistance finding and interpreting your inventory turns or fill rate, send us a message. We’ve been helping dealerships for over 20 years to increase their inventory productivity resulting in better turns, higher fill rates, and an efficient, profitable parts department.