Days Inventory Outstanding

Days Inventory Outstanding

KPI Details

Days Inventory Outstanding is a vital KPI in Supply Chain Management that measures the amount of inventory supply (in days) that a company has on hand. A relatively low value for this KPI indicates that the company keeps a low supply of inventory on hand, which may indicate high inventory turnover, but may also be a leading indicator of potential for backorders and/or a lack of cost avoidance within the procurement function (i.e., purchasing in bulk to replenish inventory, when possible, to reduce procurement costs). On the other hand, a relatively high value may indicate that the company's inventory is overstocked, and the organization's purchasing/procurement, sales and related forecasting functions are not working in concert to determine the appropriate inventory levels based on forecasted demand.

KPI Definition

The total dollar value of the inventory-on-hand divided by the average cost of goods sold (COGS) per day.

KPI Calculation Instructions Days Inventory Outstanding?

Two variables are used to calculate this KPI: (1) the total dollar value of the inventory on hand, and (2) the average cost of goods sold per day. To calculate the total dollar value of inventory on hand, calculate the total cost of raw materials plus the total materials and labor cost for work-inprocess and finished goods. To calculate average cost of goods sold per day divide the total COGS in a year by 365 days.

KPI Formula :

(Total Dollar Value of Inventory / Average COGS per Day)