When you are interested in making your money work for you, then there are two Key Performance Indicators relating to Stock Turn for you to measure: this one and True Parts Stock Turn.
It is vitally important that you understand the difference between the two KPI as they tell you very different things about your business. The calculation for Total Parts Stock Turn is the Annualised Parts Purchases divided by the value of total Parts Stock.
Example:
A) Annualised Parts Purchases = R695,688 B) Parts Stock Value (at cost price) = R115,948 C) Total Parts Stock Turn (per year) = 6 (A ÷ B)
Discussion:
This is a useful trend to measure, but it can be misleading. The assumption is that this KPI tells you how many times that your Parts Stock is turned over each year, whereas in reality this is not the case. This is because the total Parts Sales include sales from parts ordered on V.O.R, which are not sales from stock.
Special note: Total Parts Stock Turn is the KPI that is shown on most reports. When you want to measure how effectively your parts stock is being utilised then you need to measure True Parts Stock Turn.