Inventory turnover
By Marji · Updated · Sources and editorial policy
Also called: inventory turns · stock turn
Inventory turnover is COGS divided by average inventory value — how many times you use up your stock in a period. There is no single right figure: judge it category by category against your delivery schedule, because a lower number means cash and shelf life are both sitting still.
Formula
Turnover = COGS for the period ÷ ((Opening inventory + Closing inventory) ÷ 2)
Worked example · A month at a casual full-service restaurant
- COGS for the month
- $32,100
- Opening inventory
- $8,400
- Closing inventory
- $7,900
- Average inventory
- $8,150
- Monthly turnover
- 3.9×
At $32,100 a month, that is about 7.6 days of food cost on hand ($8,150 ÷ $1,070 a day). Roughly $8,000 is tied up in stock at any moment, and every extra day on the shelf is another day of spoilage risk for the perishable part of it.
| Category | What its turnover should follow | What to watch |
|---|---|---|
| Produce | Delivery frequency and a short shelf life | Discards before use |
| Dairy | Delivery frequency and steady usage | Date-expired product |
| Fresh protein | Case sizes and price breaks against shelf life | A case discount that spoilage eats |
| Frozen | Storage space and freezer life | Freezer burn and forgotten stock |
| Dry goods | Order convenience; cheap to hold | Cash tied up in bulk buys |
| Alcohol | Deliberate holding (wine especially) | Mixing it into the food figure |
The guide that works it through
Restaurant Inventory Turnover and Days on Hand: How to Calculate and Use Them
Calculate restaurant inventory turnover and days on hand from counts and invoices, split them by category, and read what the numbers say about pars, cash and spoilage.
Related terms
Days on hand
How many days of normal usage your current stock represents.
COGS (cost of goods sold)
The cost of the food and beverage actually consumed in a period, computed from inventory rather than from purchases.
Par level
The quantity of an item you want on hand at the start of each order cycle — enough to cover demand plus a safety buffer.
Spoilage
Product lost to age, temperature or damage before it could be sold.
Usage rate
How much of an item you consume per day or per cover — the input behind every par level and order.