Days of Supply Formula
Formula Variables Defined
| Variable | Definition | Practical Notes |
|---|---|---|
Days of Supply |
Number of days current inventory will last | Your result. Compare to Lead Time to decide whether to reorder. |
On-Hand Inventory |
Current quantity (or value) of stock available for use or sale | Use units if demand is in units; use $ if demand is in $/day. Do not include damaged, reserved, or quarantined stock. |
Daily Demand |
Average quantity (or value) consumed or sold per day | Use a 30-day or 90-day rolling average. A single day's figure is too noisy for reliable results. |
When You Have Annual Demand Instead of Daily
If your systems only report annual or monthly demand, convert first:
Then apply the main formula: DOS = On-Hand ÷ Daily Demand. For example, if you have 1,500 units on hand and annual demand is 18,250 units:
Daily Demand = 18,250 ÷ 365 = 50 units/day
DOS = 1,500 ÷ 50 = 30 days
All Days of Supply Formula Variants
The Target Days of Supply Formula
Knowing your current DOS is only useful if you know what it should be. The target formula tells you the minimum DOS you need to hold to avoid a stockout:
When your current DOS falls to the Target DOS level, that is your reorder point. Place an order immediately. If DOS drops below Target DOS, you are already past your reorder point and need to act urgently.
Example: Lead Time = 14 days. Safety Stock = 100 units. Daily Demand = 20 units/day.
Safety Stock Days = 100 ÷ 20 = 5 days. Target DOS = 14 + 5 = 19 days. Reorder when DOS reaches 19 days.
Step-by-Step Formula Examples
Example 1: Retail — Units-Based
Example 2: Manufacturing — Value-Based
The Financial Formula: DOS vs DIO
Inventory analysis uses two related but distinct formulas. Understanding which one is which prevents confusion when finance and operations teams are in the same conversation:
| Metric | Formula | Input data | Answers |
|---|---|---|---|
| DOS (operational) | On-Hand ÷ Daily Demand | Current inventory + recent demand | How long will this stock last? |
| DIO (financial) | (Avg Inventory ÷ COGS) × 365 | Historical averages from financial statements | How long did inventory sit on average? |
| DIO ↔ Turnover | 365 ÷ Inventory Turnover | Inventory Turnover ratio | Converts turnover ratio to days |
DIO and DOS will often give different numbers for the same company at the same point in time — that is expected. DOS reflects the current situation; DIO reflects the historical average. If you just cleared a large shipment, current on-hand may be high (high DOS) even if historical averages were lean (low DIO). For day-to-day decisions use DOS; for investor-facing metrics and peer benchmarking use DIO (see the Inventory Turnover Calculator).
DOS to Reorder Point: Connecting the Formulas
Days of Supply and Reorder Point are two expressions of the same replenishment logic. The reorder point is the inventory quantity at which DOS equals your Target DOS. They are inversely convertible:
If Target DOS = 21 days and daily demand = 20 units/day, Reorder Point = 21 × 20 = 420 units. When on-hand inventory hits 420 units, DOS = 21 days → trigger an order. The Reorder Point Calculator solves this directly from lead time, demand, and safety stock.
Calculate your Days of Supply and compare it to your lead time instantly.
Open the Calculator →Frequently Asked Questions
What is the Days of Supply formula?
Days of Supply = On-Hand Inventory ÷ Average Daily Demand. If you have annual demand, convert first: Daily Demand = Annual Demand ÷ 365. Example: 600 units on hand ÷ 30 units/day = 20 days of supply.
What is the Target Days of Supply formula?
Target DOS = Lead Time (days) + Safety Stock Days. Safety Stock Days = Safety Stock Quantity ÷ Average Daily Demand. If lead time is 14 days and safety stock is 140 units with 20 units/day demand, Safety Stock Days = 7. Target DOS = 14 + 7 = 21 days. When current DOS falls to 21 days, place a new order.
What is the difference between the DOS formula and the DIO formula?
DOS = On-Hand Inventory ÷ Daily Demand. Forward-looking, uses current data, for operations teams. DIO = (Average Inventory ÷ COGS) × 365. Backward-looking, uses historical period averages, for financial reporting. They often give different numbers for the same company — both are correct for their respective purposes.
Should I use units or $ in the Days of Supply formula?
Either works — but you must be consistent. If on-hand inventory is in units, daily demand must also be in units. If on-hand is in dollars ($ value of inventory), daily demand must be in $/day (daily cost of goods consumed). Mixing units produces a meaningless result. For SKU-level tracking, units are usually more practical. For portfolio-level or financial analysis, $ value is easier to aggregate.
How do I convert Days of Supply to a Reorder Point?
Reorder Point (units) = Target DOS × Daily Demand. If your Target DOS is 21 days and daily demand is 20 units/day, your reorder point is 21 × 20 = 420 units. When on-hand inventory hits 420 units, your DOS equals 21 days — the reorder trigger. Use the Reorder Point Calculator to compute this directly from lead time, demand rate, and safety stock.