How many days stock stays in the warehouse

"The turnover ratio is four" makes sense to a specialist, but it sounds abstract to a warehouse manager or an owner. "Stock sits in the warehouse for 91 days on average" is understood at once: about three months. This metric is called days of stock, and it comes straight from turnover.

Formula and example

Days of stock = 365 ÷ turnover ratio.

You can reach the same result another way: average inventory ÷ one day of cost. Example: annual cost of goods 1,200 million so'm, average inventory 300 million so'm, turnover 4. First way: 365 ÷ 4 ≈ 91 days. Second way: cost per day 1,200 ÷ 365 ≈ 3.29 million so'm, and 300 ÷ 3.29 ≈ 91 days. Both agree.

The result reads simply: 91 days means cash put into stock comes back after roughly three months. If delivery takes only 10 days, you are holding clearly more than you need.

If you calculate for a month or a quarter, use the length of the period instead of 365: 30 days for a month, 90 for a quarter.

Two different "days"

The term is used in two senses, and they should not be confused.

The first looks backward: how many days stock has sat, on average. That is the formula above, and it assesses the general health of the warehouse.

The second looks forward, that is, days of cover: how many days of sales the current balance will last. The formula is balance ÷ average daily sales. Example: 600 pieces on the shelf, 20 sold per day on average, so it lasts 30 days. If delivery takes 12 days, a new order must be placed within 30 − 12 = 18 days. The first measure is for analysis, the second for daily ordering.

Compare with shelf life

The most dangerous side of days of stock shows up in food, medicines and cosmetics. Suppose a product has a 90-day shelf life and stock equals 120 days of sales. Within 90 days only 90 ÷ 120 = 75 percent will sell, and roughly a quarter will expire. In practice it is worse: a customer will not take an item with a day or two left, so the real selling window is shorter.

Set target days by category

There is no universal answer to "how many days is good?" There is a logic, though: required days of stock = supplier lead time + interval between orders + days of safety stock. For example, delivery takes 10 days, we order once a week (7 days) and safety stock is 3 days: 10 + 7 + 3 = 20 days. Anything above that is money lying idle.

As a rough guide: for fast-selling food it is a few weeks, for household chemicals and cosmetics about two months, and for building materials and appliances up to three or four months. This is only an example; set targets for your own suppliers and demand.

Once you reach the target, the cash released is easy to calculate. Cut days of stock from 91 to 70 and average inventory becomes 70 × 3.29 ≈ 230 million so'm. So about 70 million so'm is freed.

Common mistakes

• Looking only at the overall figure. Within an average of 91 days one category may sit for 20 days and another for 250. Calculate by category and ABC group too.
• Forgetting goods with no sales. For them the days come out infinite, so keep them out of the overall average and list them separately: not sold for 90, 180 and 365 days.
• Calculating at selling price. Use cost, otherwise the days look shorter.
• Taking the year-end balance as the average. Stock built up before a holiday inflates the result.
• Using a different number of days each month (360, 365, working days). Pick one and apply it always.

Conclusion

Days of stock translates a number into plain language and answers directly how many days cash lies in the warehouse. But it is meaningful only with reliable balances and correct costs. CountLab combines stock-count results with days of stock, ABC/XYZ analysis and a cycle count plan to show which items to cut back and which to check more often.