Inventory Days of Supply

What is Inventory Days of Supply?

This metric calculates the number of days that inventory will last at the current demand rate.

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How to calculate Inventory Days of Supply?

Inventory Days of Supply = (Total Inventory / Cost of Goods Sold) * 365

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What is the business impact of Inventory Days of Supply?

A high days of supply indicates overstocking, tying up capital, while low days of supply might lead to stock-outs.

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Industry benchmark for Inventory Days of Supply

In order to efficiently manage inventories and balance idle stock with being understocked, many companies aim to have 30-50 days as the Days Supply of Inventory.

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How to improve Inventory Days of Supply?

• Improve sales forecasting accuracy to avoid situations of overstocking.
• Implement Just-In-Time (JIT) inventory to minimize the lead between receipt and dispatch of inventory.
• Adopt a continuous review system for stock replenishment instead of a periodic review system.

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