Generally, Inventory days of supply are used for work in process (WIP), raw materials (RM), partially finished goods (PFG), and fully finished goods (FFG).įormula to calculate inventory days of supply: When it comes to the manufacturer, evaluate the average time between acquiring raw materials and selling the final product to a distributor. In other words, this metric implies the average time in days during which a firm or warehouse holds its stock before shipping it.Īlternatively, this metric depicts the average time between a company purchasing the goods and selling them to customers. This metric helps evaluate the average time a company takes to sell its whole inventory. This metric is an efficiency ratio commonly recognized as the Inventory Period or Days in Inventory or Days Inventory Outstanding or Days Sales in Inventory. This value also helps determine the cash conversion cycle (the average number of days a company takes to transform resources into revenue.ĭSI = (Inventory /Cost of Sales) x (No. The DSI value signifies the average number of days a company’s inventory resources are recognized in sales in the year. The result is subsequently multiplied by the number of days in a particular year, quarter, or month. To calculate the DSI value, divide the inventory balance (comprising work-in-progress) by the cost of stocks sold. It is crucial for businesses because it facilitates management to monitor inventory and evaluate the rate of inventory turnover.

For calculation purposes, products regarded as “work in progress” (WIP) are covered in the inventory.ĭSI is a principal component of a company’s potential to handle its inventory. Occasionally known as days in inventory or inventory days, Days Sales in Inventory (DSI) is a parameter that evaluates the average time or number of days a business needs to transform its stock into sales.

Days in inventory turnover formula