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Days of Inventory measures the number of days worth of Inventory the company holds on its books.

Calculation

Days of Inventory
=	Inventory   × 365 days Cost of Goods Sold

where

• Inventory = Average total Inventory at cost (= average of beginning and ending inventories). This includes Raw Material, Work-in-Process and Finished Goods inventories
• Cost of Goods Sold = Total annual Cost of Goods Sold

Unit of measure: days (Calendar days)

Importance

A lower number of days indicate a better use of working capital. Reducing inventory frees up cash.

Notes

Days of Inventory measures all inventories of marketed products. This includes: Finished Goods, Raw Material, Work-in-Process, On-hold and Rejected. Days of Inventory reported by supply chain includes those inventories that are allocated to that specific supply chain. Returned products should therefore be reported for Reverse Logistics supply chain(s).

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Hierarchy

ID	Name	Level	x
AE1	Cash Conversion Cycle	1	AE1
AE12	Days of Inventory	2	AE12
AE121	Days of Raw Materials Inventory	3	AE121
AE122	Days of WIP Inventory	3	AE122
AE123	Days of Finished Goods Inventory	3	AE123

Process(es)

ID	Name	Level	x
P1	Plan Supply Chain Operations	2	P1
P2	Plan Source	2	P2
P3	Plan Make	2	P3
P4	Plan Deliver	2	P4
P403	Calculate Delivery Plan	3	P403
S006	Negotiate	3	S006
S1	Source-to-Replenish	2	S1
S2	Source-to-Order	2	S2
S3	Source-to-Engineering-Order	2	S3
M1	Make-to-Stock	2	M1
M2	Make-to-Order	2	M2
M204	Produce	3	M204
M3	Make-To-Engineering-Order	2	M3
M305	Produce	3	M305
M309	Transfer	3	M309
M4	Re-Make	2	M4
M410	Transfer	3	M410
D1	Deliver-From-Stock	2	D1
D2	Deliver-to-Order	2	D2
D3	Deliver-To-Engineering-Order	2	D3
D4	Deliver Returns	2	D4

Days of Inventory Cash Conversion Cycle 51200 2 Asset, Management, Efficiency, Inventory, Days, Supply Chain, Stock, Working, Capital The number of days worth of Inventory the company holds on its books