Days Sales in Inventory: How to Calculate DSI

A brand can ensure those West Coast warehouses have enough inventory to avoid stock outs. The distributed network also allows brands to allocate different inventory levels at different warehouses. A smaller number means a brand is more efficient in selling through its inventory, while a higher number might indicate a brand might have too much inventory on hand.

Next, we can calculate the Days Sales in Inventory by dividing 365 by 4, which comes out to be 91.25 days. A furniture manufacturer has sold 240,000$ worth of goods in the last year. Check out our detailed blog post on how to calculate the cost of goods sold. The cost of goods sold (COGS) is another crucial accounting metric that designates the total cost of manufacturing all the finished goods that are sold within a fiscal period. It’s calculated by summing up the beginning and ending inventory values for a given period and dividing them by 2.

Days sales in inventory formula

While there are many metrics that help brands track inventory management efficiency, days sales in inventory contextualizes this efficiency by putting it into a discrete number of days. Alternatively, if days sales in inventory is high, inventory turnover will be low. The two metrics are also inversely proportional; when days sales in inventory is low, inventory turnover is high. In order to calculate the days sales in inventory, brands need to first calculate their inventory turnover ratio. Days sales in inventory (DSI) measures the average number of days a brand takes to sell through its inventory. High turnover rates indicate that your products are in demand, leading to reduced storage costs and improved profitability.

Limitations of Sales Estimators

Before participating in these programs, consider the costs and benefits, including program fees and expected return on investment. On the other hand, in-Cart discounts are applied when a customer adds an item to their cart and can be a percentage off the purchase price or a fixed dollar amount. POS discounts are applied at the point of purchase when a customer checks out and can be in the form of a coupon code or an automatic discount applied to the order total. However, as a general guideline, it is recommended to aim for a low excess inventory rate, typically around 10% or less. That’s why Pacvue is essential to move everything into one central place for tracking and management.

Best Order Management System for Scaling Brands in 2025

It’s essential to monitor inventory levels and adjust pricing strategies to avoid overstocking. Overstocked inventory can result in lower pricing power, frustrated customers, and reduced profits. Inventory account accuracy is important to ensure the optimal stock level to fulfill customer demand. The Flowspace platform provides real-time, actionable insights to help brands make smarter inventory management and allocation decisions. Accurate demand forecasting and inventory audits will also help businesses avoid an overflow of outstanding inventory.

How to Interpret Your Business’s DSI Ratio

DSI can also measure the demand for inventory, the speed of the cash conversion cycle, how effectively a business manages its inventory, and a brand’s cash flow. Or are products sitting on shelves too long and unnecessarily increasing storage costs? Are products selling out before a brand can restock them? By knowing average monthly sales, you can order the right amount of stock, reduce storage fees and avoid stockouts.

• Days sales in inventory measures how long it takes a brand to sell through its inventory and is an indicator of how long a brand’s cash is tied up in inventory.
• A decreasing days sales of inventory might indicate that items are selling faster than usual, possibly leading to stockouts if not addressed promptly.
• POS discounts are applied at the point of purchase when a customer checks out and can be in the form of a coupon code or an automatic discount applied to the order total.
• Remember that the pricing strategy that works best for your business today may not be the best tomorrow.

Implement the Reorder Point Formula

While a low days sales in inventory is better for most brands, brands need to ensure they have enough stock to meet customer demand. The days sales in inventory metric can give brands critical insight into how long it takes to sell through their inventory and discover ways to optimize their inventory management process. In general, a low Days Sales in Inventory is preferred, as it indicates that a business is moving stock quickly and efficiently, both in terms of average daily sales and inventory management, representing good financial health.

Days sales in inventory vs inventory turnover ratio

• Track excess inventory over time, then adjust ordering frequency and safety stock to minimize overstocking.
• While a low days sales in inventory is better for most brands, brands need to ensure they have enough stock to meet customer demand.
• Setting minimum and maximum prices for your products is crucial to ensure competitive pricing.
• Effective inventory management is crucial for maintaining a healthy balance between supply and demand, directly impacting a business’s financial health and operational capabilities.

This helps increase visibility and attract more potential buyers for your product. Make sure your product listing is well-written, includes high-quality images, and is optimized for search engine optimization (SEO). Remember that the pricing strategy that works best for your business today may not be the best tomorrow. Analyze your sales and pricing data regularly to identify what’s working and isn’t.

IN-STOCK AND STRANDED INVENTORY MANAGEMENT: How to Fix Stranded Inventory on Amazon FBA

By using formulas to determine how fast you sell certain products and how long it takes you to get more stock, you can better predict when and how much inventory to order to keep your stock levels optimal. Modern software solutions are designed to do much more than track inventory – they integrate various aspects of manufacturing and supply chain management, allowing businesses to anticipate demand and adjust production accordingly. Effective inventory management is crucial for maintaining a healthy balance between supply and demand, directly impacting a business’s financial health and operational capabilities.

One way to prevent overstocking and minimize excess inventory is to adjust your ordering frequency to match the rate at which your products sell. Tracking average inventory is necessary because it helps businesses find the right balance between supply and demand, avoiding lost sales and excess inventory. A quality inventory management system helps brands accurately forecast inventory needs and reorder products at just the right time—not too soon and not too late. Flowspace improves product inventory management by providing complete inventory visibility of inbound, outbound, and in-progress stock. Flowspace pairs powerful fulfillment software with a flexible nationwide fulfillment network to support growing ecommerce brands and help them lower their days sales in inventory to reduce costs and increase retained earnings. Days sales in inventory is also important to track because it’s another metric that can help brands tell how efficient their inventory management is.

Accuracy varies, but most high-quality tools are within 10–20% of actual sales. Let’s say you’re considering reselling a Bluetooth speaker ranked #3,000 in Electronics. There are several sales estimators on the market. Be sure to understand the difference between ROI and profit margin when making inventory and pricing decisions. Use an FBA calculator or profit margin tool to see if the numbers make sense after fees, shipping, and sourcing costs. Consider whether you could capture enough of that demand given existing competition.

Days sales in inventory is an inventory metric that measures the average number of days a company takes to convert its inventory into revenue. However, the days sales in inventory is a metric that is also considered by investors, as it is part of the cash conversion cycle (CCC). Frequently selling off inventory can put customers’ demands in danger and have a negative impact on your store’s reputation — when orders can’t be fulfilled due to a stockout. Once you have already calculated your average days-to-sell inventory formula, it’s time to assess how good the ratio is for your business.

The reorder point formula ensures you replenish inventory before stockouts occur. Sellers must focus on key practices to ensure they maintain the right stock levels, optimize operations, and maximize profitability. The balance between availability and efficiency is the key to boosting both sales and customer trust.

And one of the most critical aspects of inventory health is maintaining optimal levels of stock. As retail and e-commerce businesses continue to grow and scale, precise inventory planning and management become an increasingly important part of streamlining operations, conserving resources, and maximizing profits. Additionally, advanced forecasting and planning tools like a Master Production Schedule can be particularly useful in maintaining optimal inventory levels and enhancing the decision-making process.

By continuously monitoring DSI and other related KPIs, inventory management software provides a dynamic view of turnover how to calculate and improve amazon days sales in inventory trends. By monitoring these trends, businesses can adjust procurement and production schedules to maintain optimal inventory levels. Understanding the DSI metric is crucial for effective inventory management and overall business health.