Divide your cost of goods sold for a period by your average inventory value over that period. If your annual COGS is 300,000 dollars and your average inventory value is 50,000 dollars, your turnover is 6, meaning you sell through and replace your stock about six times a year.
What is a good inventory turnover ratio for Amazon FBA?
It varies by product, but many FBA sellers aim for roughly 4 to 12 turns a year, which is about one to three months of stock on hand. Higher turnover frees cash and cuts storage fees; too high risks stockouts and the low-inventory-level fee. The right number balances holding cost against the cost of running out.
T. Brian Jones is co-founder and CTO of Inventory Hero. He leads the engineering behind its Amazon data pipeline, demand forecasting, and the AI platform that lets sellers talk to their live inventory, sales, and supplier data in plain language.
What is the difference between inventory turnover and days sales in inventory?
They are the same thing expressed differently. Turnover is times per year; days sales in inventory (DSI) is the average number of days a unit sits, calculated as 365 divided by turnover. A turnover of 6 equals a DSI of about 61 days. Use whichever framing is clearer for the decision at hand.
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The inventory turnover ratio is your cost of goods sold divided by your average inventory value: the number of times you sell through and replace your stock in a year. The short version: higher turnover means less cash tied up and less storage paid, but pushed too far it means stockouts, so there is a healthy middle, and many FBA sellers land somewhere in the 4 to 12 range. Below is the formula, a worked example, and how to read the number.
Inventory turnover = cost of goods sold / average inventory value
Both figures cover the same period, usually a year. COGS is the cost of what you sold; average inventory value is the average cost of the stock you held (typically the start-of-period plus end-of-period value, divided by two). Use landed cost (freight, duties, and Amazon inbound fees, not just the factory invoice), not the bare factory price, for both, or the ratio is off.
Say your annual COGS is 300,000 dollars and your average inventory value over the year is 50,000 dollars:
Input
Value
Annual COGS
$300,000
Average inventory value
$50,000
Inventory turnover
300,000 / 50,000 = 6
A turnover of 6 means you cycle your entire stock about six times a year, or hold roughly two months of inventory on average. Run your own numbers in the inventory turnover calculator.
To pull the inputs: take units sold from your Business Reports (Units Ordered by ASIN) priced at your own landed-cost sheet for the COGS figure, and take average inventory value from the FBA inventory snapshot at the start and end of the period. Sell-through rate is the unit-volume version of the same efficiency read; turnover is the dollar version, so the two move together.
A turnover of 6 is a DSI of about 61 days, meaning the average unit sits about two months before selling. Turnover is the finance-friendly "times per year" framing; DSI is the operator-friendly "how many days" framing. Use whichever makes the decision clearer.
There is no universal number, because it depends on margin, lead time, and product type. But a useful frame: many FBA sellers aim for roughly 4 to 12 turns a year, which corresponds to holding about one to three months of stock.1
Too low (below ~4). Cash is tied up and storage fees mount; you are likely overstocked, and slow movers are dragging the average. This is where the aged-inventory surcharge starts to bite.
Healthy (~4 to 12). Inventory is working without excessive risk of running out.
Too high (well above ~12). You may be running too lean, risking stockouts and the low-inventory-level fee, and paying more in freight from frequent small orders.
Read it per SKU, not just as an account average. A blended turnover of 6 can hide a fast SKU at 20 and a dead one at 1, and it is the dead one you need to see.
The 4 to 12 range is a starting frame, not your number. Your real floor is set by how long it takes to replace stock. A rough guide:
Minimum turns to stay flowing = 365 / (lead time in days + your safety-stock days)
If your supplier lead time is 60 days and you hold 30 days of safety stock, you need at least 365 / 90 ≈ 4 turns a year just to keep product moving without carrying excessive overlap. A shorter 30-day lead time supports a much higher target. Set your floor from your own replenishment cycle, then treat anything well below it as overstock and anything far above it as stockout risk.
One caveat: if your sales are seasonal, calculate turnover quarterly or monthly, not just annually. A blended annual figure will misrepresent both your Q4 peak and your slow months, hiding the fact that you were overstocked half the year and lean the other half.
Clear the slow movers. They are what drag the average down. Pull the Manage Inventory Health report; any ASIN turning below 2 with an average age past 90 days is a clearance candidate, so promote, bundle, or remove it before it ages into surcharges. See restock planning.
Right-size order quantities. Ordering closer to real demand raises turnover; over-buying lowers it.
Do not chase turnover into stockouts. Balance it against days of supply; the goal is fast cash cycling while staying in stock, not the highest possible number.
The inventory turnover ratio is COGS over average inventory value, the times per year you cycle your stock, and it is the same information as DSI seen from the other side. Aim for a healthy middle rather than the maximum, read it per SKU, and use it alongside GMROI so you are optimizing for profit, not just speed. For the wider metric set, see the inventory KPIs that matter.
Inventory turnover benchmarks vary widely by industry and product; the 4 to 12 range is a common operating band cited in standard inventory-management references, not an Amazon figure. Set your own target from your margin and lead time. ↩