Days of Supply

Tags: Glossary

Measure of quantity of inventory-on-hand, in relation to number of days for which usage which will be covered. For example, if a component is consumed in sales or manufacturing at the rate of 100 per day, and there are 1,585 units available on-hand, this represents 15.85 days supply. The goal, in most cases, is to demonstrate efficiency through having a high turnover rate and therefore a low days’ inventory. However, realize that this ratio can be unfavorable if either too high or too low. A company must balance the cost of carrying inventory with its unit and acquisition costs, with the potential of lost business and ultimately lost customers if shortages are pervasive.

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