Days Of Supply: How To Calculate It And Why It Matters

March 31, 2019 by Price-Fuel

stock level/days of supply

When is the last time you took a look at your inventory levels? Are you sure you have enough product on hand to keep up with your current sales demand?

If you’re like 8% of small business owners, you don’t track inventory levels at all. Or, maybe you fit into the 14% who still rely on a manual, pen-and-paper process to organize your assets.

The issue with taking this laissez-faire approach? Your success depends on making real-time decisions based on your customers’ buying habits.

To keep your costs down and your profits up, you’ll need to regularly adjust your pricing strategy in accordance with various data points and Key Performance Indicators (KPIs). One of the major metrics to track is Days of Supply or DOS.

Today, we’re taking a closer look at DOS, how to calculate it and what it means for your Amazon store. Grab your calculator and let’s get started.

What Are Days of Supply?

Put simply, your DOS metric is how many days it will take before all the stock in your inventory runs out.

Store managers calculate DOS based on the assumption that recent sales levels will remain consistent with how they’ve been for the last 30, 60 or 90 days.

For instance, say you have 100 food processors merchandised on your shelf. In the 30 days, you’ve sold 25 of them, with 75 units remaining.

This means your average rate of sale is 25 units per 30 days. With that data in hand, you can estimate that it will take you another 90 days to sell the rest of the food processors, because 75 divided by 25 is 3, and 3 times 30 equals 90.

So, for those 100 total food processors in your inventory, the DOS is 120 days.

How to React to a Peak or Drop in Sales

When your sales spike and demand is up, that’s the ideal time to reevaluate your pricing strategy. To do so, you can leverage software tools that will automatically raise your prices until you’re able to restock.

This helps you make the most of every sale while still ensuring you maximize control over your inventory.

Conversely, when your sales drop, you can adjust your prices down to generate new interest in your listings. The same tools can be used to perform this function.

The Benefit of Recurring Order Cycles

Another way to maintain control over your inventory numbers is to use your DOS calculation to set up recurring order cycles with your suppliers.

Are you currently only ordering more inventory when your levels dip low? This is a risky move that could leave you without product at some of your most in-demand times.

When you better understand how your products are performing based on their current DOS metrics, you can arrange to order inventory at set cycles rather than an on-demand basis.

Use each product’s estimated lead time and popularity to help gauge your recurring order cycles. Some will require that you reorder every 14 days, while you may be able to wait 30 days or more in between other orders.

The benefit of taking this step?

Your Amazon store will consistently receive new stock and you can rest assured that you’ll never run out of inventory when you need it the most.

Moreover, as the shop owner, you can better plan your pricing approach and control your marketing spend when you know how much money is going out every week to keep your shelves stocked.

Avoiding Stockouts

To Amazon, a stockout is a sign that a shop is unreliable. When your shop has an empty inventory, Amazon will remove your listing, labeling it as “inactive.”

Put simply, when you don’t have an active shop, you don’t have sales.

In the meantime, your competitors get a leg up and outprice you as you scramble to refill your shelves.

If you’ve overcommitted and sold more items than you have in stock, you also run the very real risk of upsetting your customers. Brand Loyalty requires reliability.

To avoid this situation, it’s helpful to adjust your pricing higher when you’re nearing your DOS limit. Doing so can help temporarily slow down sales until you’re back in business. Make sure you have set a reasonable price limit.

Inventory Management, Made Simple

As a busy Amazon store owner, you may not have the time or the bandwidth to keep track of how quickly your inventory is moving.

Knowing when to raise your price point and restock your shelves after a certain product thrives is necessary to keep that momentum. You should also know when sales are lagging and products are stagnant, so you can lower your price accordingly and jumpstart a sale frenzy.

It all starts with calculating your days of supply. Thankfully, our top-ranked repricing software takes care of the behind-the-scenes calculations for you. It let’s you calculate based on different time ranges in order to detect trends.

From within our interface, you can quickly sort your products by a range of factors, including your DOS. This enables you to make quick pricing changes as needed.

To see for yourself how our tool works, sign up for a free, 14-day trial. Less chaos and more control? Sounds like a plan.

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