54. Inventory Days on Hand (DOH)
Measuring How Long Your Inventory Lasts Before It Runs Out
What Is Inventory Days on Hand (DOH)?
Inventory Days on Hand, also known as Days Inventory Outstanding (DIO) or Days Sales of Inventory (DSI), is a key metric used in inventory management and supply chain analysis.
It tells you how many days, on average, your current inventory will last before it is sold or used.
In other words, it answers:
"If I stopped purchasing today, how many days could I continue selling with the inventory I already have?"
Why It Matters in Logistics and Operations
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Cash Flow: High days on hand mean your cash is tied up in unsold goods.
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Efficiency: A low number may signal strong demand and lean inventory, but if it’s too low, you risk stockouts.
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Storage Optimization: The metric helps optimize warehouse space and carrying costs.
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Supplier Planning: Helps you understand how urgently you need replenishment and whether you can handle delays.
It’s especially important in industries with:
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Perishable goods (food, pharma)
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Fast fashion (short product life cycles)
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Seasonal inventory (holiday merchandise)
Formula for Inventory Days on Hand
There are two common ways to calculate it.
Method 1: Using Inventory Turnover Ratio
Inventory Days on Hand = 365 divided by Inventory Turnover Ratio
Method 2: Using Direct Values
Inventory Days on Hand = (Average Inventory × 365) divided by Cost of Goods Sold (COGS)
Example Calculation
Let’s say:
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Cost of Goods Sold (COGS) for the year = €730,000
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Average Inventory = €100,000
Using the formula:
Inventory Days on Hand = (100,000 × 365) ÷ 730,000 = 50 days
→ This means your inventory lasts around 50 days before it runs out.
Terms You Should Know
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COGS (Cost of Goods Sold): The direct cost of producing or purchasing the items you’ve sold.
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Average Inventory: Calculated as (Beginning Inventory + Ending Inventory) ÷ 2
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Carrying Costs: Costs related to storing and maintaining inventory, including space, insurance, depreciation, and capital tied up.
What’s a Good DOH Value?
It depends heavily on your business type:
| Industry | Typical DOH Range |
|---|
| Grocery / Perishables | 5–15 days |
| Apparel / Fashion | 30–90 days |
| Electronics | 40–70 days |
| Manufacturing (B2B) | 50–100+ days |
Too high? You might have overstock, excess warehousing costs, or obsolete goods.
Too low? You risk stockouts, customer dissatisfaction, and missed sales.
How to Reduce Inventory Days on Hand
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Improve Demand Forecasting
Use historical data, seasonal trends, and AI-driven tools to plan more accurately.
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Implement Just-in-Time (JIT) Inventory
Only order stock when you’re close to running out, reducing idle stock.
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Faster Inventory Turnover
Promote fast-moving items and optimize pricing strategies.
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Better Supplier Relationships
Shorter lead times from suppliers help keep inventory lean.
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Use ABC Classification
Focus your attention on high-value, high-movement items.
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Inventory Visibility Tools
Use a WMS (Warehouse Management System) or ERP to track real-time levels.
Logistics Use Case Example
A warehouse stores electronics for an online retailer. Their average DOH is 85 days. After analyzing customer trends and removing slow-moving SKUs, they:
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Reallocate shelf space to high-turnover items
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Shorten replenishment cycles
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Renegotiate supplier minimums
Result: Inventory Days on Hand drops to 55 days, improving cash flow and reducing warehouse costs by 18%.
Summary
Inventory Days on Hand is a critical metric that reveals how well you're balancing inventory supply with customer demand. It directly affects your:
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Cash flow
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Warehouse efficiency
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Service levels
By monitoring DOH and adjusting your operations, you can reduce waste, avoid stockouts, and make smarter procurement decisions — all while keeping your business agile and competitive.
