Influence of turnover rate and goods rotation on warehouse planning and management
How often is an item moved per year and what does that mean for your warehouse structure? Turnover rate and goods rotation are key indicators for economical warehouse planning. They influence layout, warehouse technology, inventories, and travel times. In this guide, you will learn how to use the right analysis to make your warehousing more efficient and optimize space utilization.
Turnover rate and goods rotation as success factors
How inventory turnover and goods rotation influence warehouse layout and storage technology
There are many things to consider when planning a warehouse. The warehouse layout and the optimal warehouse technology for the respective project depend on various factors. The warehouse should enable the highest turnover rate and the use of space must be optimal. The stored items should be easily accessible, handling should be optimized, and goods control should be simple. The warehouse layout and storage technology depend to a large extent on the type of goods stored. In addition to the physical properties of the goods, business indicators are also decisive. This is where the key figures of inventory turnover and goods rotation come into play.
What are inventory turnover and goods rotation?
Reduce capital commitment and increase profitability
Inventory turnover describes how often an average inventory is removed and replenished within a certain period, for example, a fiscal year. The key figure can refer to the entire warehouse or to individual storage areas.
It is particularly relevant for inventory management, as it has a direct impact on capital commitment. The higher the inventory level, the more capital is tied up and the lower a company's liquidity. If liquidity falls too low, the risk of insolvency increases.
A high turnover rate usually means less capital tied up and better profitability.
What is merchandise turnover?
Goods rotation describes the sales speed of individual products. It corresponds to the turnover rate of a specific item. The faster a product sells, the higher its goods rotation.
ABC analysis is often used for classification. Products are divided into fast movers, medium movers, and slow movers.
- Fast movers sell quickly, have short storage times, and incur low storage costs.
- Slow movers remain in storage for a long time, take up storage space, and incur higher costs. Reasons for this can include low demand, excessive pricing, or unfavorable product placement.
Targeted assortment planning is therefore crucial for the efficient use of storage space.
ABC analysis: Classification according to goods movement
ABC analysis helps to structure items according to their economic importance and goods rotation.
- A items are fast movers with a high turnover rate.
- B items are in the middle range.
- C items are slow-moving items with low demand.
This classification forms the basis for structured warehouse organization and optimized picking processes.
XYZ analysis: Taking consumption fluctuations into account
In addition to goods rotation, consumption fluctuations also play an important role. This is where XYZ analysis comes in.
- X items have constant consumption.
- Y items show recognizable trends with fluctuations.
- Z items show irregular consumption.
The combination of ABC analysis and XYZ analysis enables sound inventory planning, better capacity planning, and targeted decisions on outsourcing or staffing requirements.
Calculating inventory turnover and goods rotation explained in an understandable way
Inventory turnover is a key indicator in inventory planning and inventory management. It shows how often the average inventory is completely turned over within a defined period, usually one year.
Formula for calculating inventory turnover
The classic calculation is based on the ratio of stock removals to average inventory:
Inventory turnover rate = inventory withdrawals ÷ average inventory
In practice, the average inventory is calculated as follows:
Ø Average inventory = inventory at the beginning of the year + sum of the 12 month-end inventories ÷ 13
Alternatively, the key figure can also be determined using financial variables:
Inventory turnover ratio = sales revenue ÷ average total capital
This variant is often used in business analysis to evaluate the capital tied up in inventory.
Relationship between inventory turnover, storage duration, and goods rotation
If the inventory turnover rate increases, the storage period automatically decreases. This means that goods remain in storage for a shorter period of time and are sold or processed more quickly.
A short storage period leads to high goods rotation. Fast-moving items are characterized by a high turnover rate and a short time on the shelf.
Goods rotation is usually calculated using the following formula:
Goods rotation = 360 ÷ inventory turnover rate
Depending on the industry, goods turnover is specified per year, month, week, or day.
Why the calculation is crucial for warehouse optimization
Precise calculation of inventory turnover and goods rotation enables better use of space, reduced storage costs, and optimized assortment planning.
This provides companies with a reliable basis for decision-making when selecting the appropriate warehouse technology and strategically aligning their intralogistics.
Influence of goods rotation on warehouse planning and warehousing
Goods rotation is a key control factor for efficient warehouse planning. It determines where items are placed in the warehouse, which storage technology is used, and how intralogistics processes are organized.
Strategically placing fast-moving items
Products with high turnover rates should be stored close to the storage and retrieval points. The aim is to shorten travel distances, minimize access times, and increase picking performance.
This allocation strategy requires a precise analysis of goods rotation. Only those who know their key figures can optimally structure storage areas.
Many companies therefore divide their warehouse into turnover zones, such as fast-moving, medium-moving, and slow-moving items. This allows warehouse processes to be systematically optimized and bottlenecks to be avoided.
Choose storage technology that suits the turnover frequency
Fast-moving items only remain in the warehouse for a short time. Dynamic flow racks or pallet flow systems are suitable for this purpose, as they enable fast storage and retrieval.
In these systems, the storage and retrieval sides are clearly separated. The goods move forward automatically on inclined roller conveyors. This ensures reliable compliance with the FIFO principle and supports seamless batch monitoring.
This solution is particularly suitable for perishable goods such as food or pharmaceutical products with expiration dates.
For slow-moving items, on the other hand, classic shelf racks or pallet racks are often sufficient.
Effects on procurement, picking, and distribution
High goods rotation not only affects warehousing, but also procurement logistics, distribution processes, and the entire picking process.
Short storage times reduce capital commitment, increase space efficiency, and improve the cost-effectiveness of the warehouse.
A systematic evaluation of goods rotation thus creates the basis for a needs-based warehouse structure and the selection of the optimal storage solution from BITO Storage Systems.
