Days of Supply (DOS) is a critical metric for inventory management that can help businesses optimize their inventory levels and improve their bottom line. Days of Supply represents the number of days that your current inventory level will last based on your average daily usage. This metric is essential because it helps businesses avoid stockouts and excess inventory, both of which can have negative consequences.

To calculate Days of Supply, you need to know your current inventory level and your average daily usage. The formula for Days of Supply is:

The formula for Days of Supply is:

Days of Supply = Inventory Value / (COGS / 365)

Where:

• Inventory Value: The total value of inventory on hand at a given point in time.
• COGS: The cost of goods sold over a given period of time, usually a year.
• 365: The number of days in a year.

To calculate Days of Supply, we divide the Inventory Value by the COGS divided by 365. The resulting value represents the number of days that the current inventory levels can sustain sales.

For example

if a business has 100 units of a product in stock and typically sells 10 units per day, its Days of Supply would be 10 (100 / 10 = 10). This means that the business has enough inventory to last 10 days at its current sales rate.

Days of Supply = $100,000 / ($500,000 / 365) = 73 days

This means that the company’s current inventory levels can sustain sales for 73 days. If the company’s sales were to continue at the same rate, it would take 73 days to deplete its current inventory levels. The Days of Supply metric can be used to help companies optimize their inventory levels and ensure that they have enough stock to meet customer demand without tying up too much capital in excess inventory.

A Days of Supply calculator is a tool that can help businesses make informed decisions about their inventory levels. By using this tool, businesses can easily calculate their Days of Supply and adjust their inventory levels accordingly. For example, if the Days of Supply calculation indicates that the business has less than a week’s worth of inventory, it may want to order more stock to avoid a stockout. Conversely, if the Days of Supply calculation indicates that the business has more than a month’s worth of inventory, it may want to reduce its orders to avoid excess inventory and free up working capital.

Optimizing inventory levels is essential for businesses because it can have a significant impact on their bottom line. Having too little inventory can lead to lost sales and decreased customer satisfaction, while having too much inventory ties up working capital and increases the risk of obsolescence or spoilage. By using a Days of Supply calculator, businesses can strike the right balance between these two extremes.

In addition to helping businesses optimize their inventory levels, Days of Supply can also be used to identify trends and patterns in demand. By tracking Days of Supply over time, businesses can identify seasonal or other trends in demand and adjust their inventory levels accordingly. For example, if Days of Supply increases during the holiday season, the business may want to order extra inventory to meet increased demand.

Overall, a Days of Supply calculator is a valuable tool for businesses that want to optimize their inventory levels and improve their bottom line. By calculating Days of Supply and adjusting inventory levels accordingly, businesses can avoid stockouts and excess inventory, improve customer satisfaction, and free up working capital.