Managing inventory would be impossible without a means to track how much inventory is on hand and if it is an appropriate amount of inventory. With that being said, the days of supply metric is a useful metric that can show an organization how many days their existing inventory will last before it reaches zero or drops into their safety stocks.
The days of supply are often evaluated by defined periods. For example, 30 days, 60 days, 90 days or even periodically. You will need to decide what period of evaluation will work best for you. From a planning perspective this can be beneficial on many different levels.
Now that we know what days of supply is, let’s look at how this metric is calculated. Days of Supply is calculated by dividing your inventory on hand by the average daily usage. For example, if your organization has 1,000 units on hand and you are using on average 14 per day you would have 71 days of supply left in inventory.
Subscribe below and receive lean, six sigma, operations, supply chain, logistics, distribution and business terms in your mailbox.
CLICK HERE TO SUBSCRIBE