What are Days on Hand for Inventory - A quick explanation
Days on Hand for Inventory, also known as Inventory days or Days of inventory on hand (DOH), measures how long it takes for a company to sell its on-hand inventory.
Days on Hand Inventory Formula
Calculate your average inventory: This is typically the average of your inventory at the beginning and end of a period.
In case you have seasonal fluctuations, consider a monthly or weekly average for more accuracy.
Determine Your Cost of Goods Sold (COGS): Find the total cost of goods sold over the same period used for your inventory average.
Calculate your Daily COGS: COGS / Number of days in that period
Days on Hand= Daily COGS / Average Inventory: This calculation will give you the average number of days it takes to sell your inventory.
How Prediko simplifies this calculation for Shopify D2C brands
Prediko offers a simple and straightforward way of calculating and managing Days on Hand for Inventory.
Prediko automates and refines the process of calculating days on hand for inventory, offering Shopify brands a seamless approach to inventory management
- Automatic Inventory and COGS Tracking: Prediko integrates with your Shopify store to automatically track inventory levels and COGS, ensuring your calculations are based on accurate and up-to-date data.
- Real-Time Insights: Get instant visibility into your inventory performance, enabling you to make informed decisions quickly.
- Optimization Recommendations: Based on your days on hand and other key metrics, Prediko provides actionable recommendations to optimise inventory levels, reduce carrying costs, and improve cash flow.
Analysing the value for Days on Hand Inventory
- Low Days on Hand Inventorysome
a) A low DOI suggests that a company is able to sell its inventory quickly.
This is often a sign of efficient operations, strong demand for products, and effective inventory management.
- A High Days on Hand Inventorysome text
b) A high Days on Hand Inventory indicates that a company holds its inventory for a longer period before selling it. This suggests poor sales performance, ineffective marketing, or issues with product relevance.
Higher DOI can lead to increased costs related to storage, as well as higher risks of obsolescence
Strategies to fix Days on Hand Inventory for your Shopify brand
- Accurate Demand Forecasting
Utilise sales data and market trends to predict future demand accurately. Tools like Prediko can easily be installed just for your Shopify store to make these predictions.
- Optimize Your Warehouse Layout. Create an efficient design for your warehouse layout to facilitate easy access to older items, promoting their sale.
- Collaborate with your sales, marketing, and finance teams to refine sales forecasts based on multiple perspectives, ensuring a more accurate demand forecast. Or, you can generate one using Prediko in just 1-click
- Adjust inventory levels based on seasonal demand fluctuations to ensure optimal stock levels throughout the year
