Average Inventory Calculator
by Zoho InventoryAverage Inventory Calculator
Stay on top of your stock levels with our free average inventory calculator. Use it to gain clarity on your stock usage patterns, make smarter purchasing decisions, and improve your inventory turnover.
Average Inventory
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What is average inventory?
Average inventory refers to the mean value of inventory a business holds over a specific period, usually a month, quarter, or year. It gives a more accurate picture of how much stock is typically on hand, helping businesses make informed decisions about purchasing, budgeting, and storage.
What you need to know?
Maintaining an optimal average inventory ensures you aren’t overstocking or under-stocking and losing out on sales.
Use average inventory to plan reorder points and manage working capital more effectively.
Track how your average inventory evolves over time and compare it against sales growth, lead times, and supplier performance.
How is average inventory calculated?
Average inventory is calculated by taking the average of the beginning and ending inventory.
What's the difference?
Average inventory
Average inventory- Time-based average
- Reflects inventory trends and movements
- Used for turnover ratios, planning, and forecasting
- Can overlook short-term spikes or dips
Ending inventory
Ending inventory- Final stock at the end of the period
- Reflects inventory at one moment in time
- Used for financial statements and reporting
- Can be misleading if period ends on a high or low note
Frequently asked questions
- It depends on your business needs. Many businesses calculate it monthly or quarterly to align with financial reporting or supply chain planning. Fast-moving industries might analyze it weekly.
- Yes, if you're a manufacturer, average inventory can include raw materials, work-in-progress (WIP), and finished goods. Retailers usually include only finished goods in inventory calculations.
- Absolutely. You can calculate average inventory per warehouse to understand how stock is distributed and identify underutilized or overburdened locations.
- Both are useful. Product-level averages help with replenishment and pricing, while overall inventory averages support financial planning and performance tracking.
- Yes, If a product consistently contributes to high average inventory but shows low or no movement in sales, it's likely dead stock. Average inventory trends can reveal such inefficiencies.
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