Stock turnover and tied-up capital: Which stock earns its space and how much money is sitting in the stockroom

What it is

Stock is money in the shape of a box. Every product that does not sell is idle money, takes up space, can expire and earns nothing. Turnover measures how many times the stock is renewed in a period: a product that turns over ten times a year sells and is restocked regularly; one that turns once or twice is a candidate for review.

The aim is not to hold less of everything but to hold the right things: what turns over, sized properly, and what does not turn over but is essential (an antidote, a rarely used treatment), in the minimum quantity.

Three simple measures

With the sales and stock your software already gives:

TURNOVER = units sold in the year ÷ average stock. The higher, the better the product moves.
DAYS OF STOCK = current stock ÷ average daily sales. They say how many days you can sell without restocking.
ABC CLASSIFICATION: a minority of products (A) account for most sales; many (C) account for very little. A is looked after more and C is reviewed downwards.

At the counter

When to recommend it

Measure turnover for the ranges taking the most space
Keep stock of essentials even if they turn over slowly
Return what the supplier accepts while it still has shelf life
Check days of stock before every big order

When not to

Hold everything “just in case”
Leave a product with no sales “because we already have it”
Confuse lots of stock with good service
Keep what is about to expire hoping someone asks for it

What to say at the counter. Make the list of what has not sold in a year. It almost always surprises, and it usually adds up to more money than it seems.

Warnings

Important Essentials are not measured by sales alone: an antidote or a rarely used treatment may not turn over and be exactly what must never be missing.
Caution A big stock is not good service if what people ask for is not there: what matters is having what is asked for.
Worth knowing Days of stock change with the season; compare them with the same month last year.

How to do a stock clean-up

Pull the list of products with stock and no sales in the last six to twelve months.
Set aside the essentials even if they do not turn over (those that must never be missing).
For the rest, decide: return to the supplier, sell with a promotion if the rules allow it, or stop restocking.
Adjust the minimums of what is left over so it is not ordered again.
Repeat every six months: it is a routine, not a spring clean.

A products and C products

Aspect	A (best sellers)	C (barely move)
Weight in sales	High	Very low
Stock	Tight and monitored	The minimum possible
Risk of stock-out	Avoided at all costs	Accepted, unless essential
Review	Frequent	Every six months

The effort goes to A; C is cleaned up, except for the essentials.

Self-assessment

Three questions. When you check your answers you will see the explanation for each one.

What does turnover measure? How many products are on the shelf How many times the stock is renewed in a period How much margin a product leaves
An antidote almost never sells. What do you do? Order large quantities Keep the minimum quantity even if it turns over slowly Stop stocking it
How often should stock with no sales be reviewed? Only at the annual inventory Every six months, as a routine Never

Training content. It does not replace the summary of product characteristics or clinical judgement.

← All pills