← Business Metric: Operational (all topics)
Inventory turns & GMROI
What it is
How many times inventory is sold and replaced in a period, and gross margin return on inventory investment - gross margin divided by average inventory at cost. GMROI answers how much gross profit each rupee of stock generates
It is the central productivity measure in retail and distribution
Impact on industries
- GMROI combines margin and turnover, so it exposes the trade-off between a high-margin slow seller and a thin-margin fast one
- Faster turns release cash and reduce obsolescence and markdown risk simultaneously
- Pushing turns too hard causes stockouts, which cost sales invisibly and damage the customer relationship
- Natural levels differ enormously by category, so it is a within-format comparison rather than a cross-retail one