{"id":1206,"date":"2022-03-14T11:00:00","date_gmt":"2022-03-14T11:00:00","guid":{"rendered":"https:\/\/www.shipbob.com\/au\/blog\/days-sales-inventory\/"},"modified":"2025-08-01T21:00:27","modified_gmt":"2025-08-01T21:00:27","slug":"days-sales-inventory","status":"publish","type":"blog","link":"https:\/\/www.shipbob.com\/au\/blog\/days-sales-inventory\/","title":{"rendered":"Days Sales in Inventory: Averages, Formula &amp; Best Practices"},"content":{"rendered":"\n<div class=\"wp-block-shipbob-blocks-single-toc single-toc\" data-controller=\"blog-toc-controller\" data-action=\"scroll@window-&gt;blog-toc-controller#scrollChanged:passive\" id=\"toc-component\"><div class=\"single-toc-overview\"><p>Table of Contents<\/p><div class=\"single-toc-read-time\"><p>** Minutes<\/p><\/div><\/div>\n<p><a href=\"#h-what-is-days-sales-in-inventory-dsi\">What is days sales in inventory (DSI)?<\/a><\/p>\n\n\n\n<p><a href=\"#h-days-sales-in-inventory-formula\">Days sales in inventory formula<\/a><\/p>\n\n\n\n<p><a href=\"#h-what-is-the-average-number-of-days-to-sell-inventory\">What is the average number of days to sell inventory?<\/a><\/p>\n\n\n\n<p><a href=\"#h-days-sales-in-inventory-vs-inventory-turnover\">Days sales in inventory vs. inventory turnover<\/a><\/p>\n\n\n\n<p><a href=\"#h-how-can-shipbob-help-with-optimizing-dsi\">How can ShipBob help with optimising DSI?<\/a><\/p>\n\n\n\n<p><a href=\"#\">Days in sales inventory FAQs<\/a><\/p>\n<\/div>\n\n\n\n<p>Sometimes, it might seem like inventory is flying off your shelves; other times, it might feel like it takes weeks for the last piece of inventory to finally get sold.<\/p>\n\n\n\n<p>But how accurate are these feelings? While you may trust your gut as a business owner, it\u2019s always best to use data to determine how fast your inventory is moving.<\/p>\n\n\n\n<p>To get the most accurate sense, you\u2019ll need to calculate your Days of Sales Inventory, or DSI.<\/p>\n\n\n\n<p>Though simple, this metric is very versatile, and can help provide critical insights into customer demand for your products, when you should <a href=\"https:\/\/www.shipbob.com\/blog\/restocking-inventory\/\">restock your inventory<\/a>, and how your company\u2019s sales compare to those of your competitors.<\/p>\n\n\n\n<p>In this article, we\u2019ll cover what DSI is, how to calculate it, and how ShipBob can help you optimise your DSI.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-days-sales-in-inventory-dsi\">What is days sales in inventory (DSI)?<\/h2>\n\n\n\n<p>Days sales in inventory (also known as <a href=\"https:\/\/www.shipbob.com\/inventory-kpis\/inventory-days-on-hand\/\">inventory days on hand<\/a>, days inventory outstanding, or days sales of inventory) refers to the average number of days it takes a retailer to convert a company\u2019s inventory into sold goods.<\/p>\n\n\n\n<p>In other words, DSI measures how many days on average it takes a business to sell their entire inventory. DSI can also be used to analyse many aspects of a business, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Customer demand for your inventory<\/li>\n\n\n\n<li>Speed of cash conversion cycle<\/li>\n\n\n\n<li>How effectively a business manages its inventory<\/li>\n\n\n\n<li>How demand for your inventory compares to that for your competitors\u2019<\/li>\n\n\n\n<li>A company\u2019s cash flow (specifically, how much of a company\u2019s cash is tied up in inventory)<\/li>\n<\/ul>\n\n\n\n<p>To calculate the DSI, you will need to know the cost of goods sold, the cost of average inventory, and the duration of the time period for which you are calculating the DSI.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-days-sales-in-inventory-formula\">Days sales in inventory formula<\/h2>\n\n\n\n<p>Here is the formula used by retailers to compute the average time it takes to sell through their whole inventory:<\/p>\n\n\n\n<p><strong>DSI&nbsp; =&nbsp; Number of days in the time period \/ Inventory turnover<\/strong><\/p>\n\n\n\n<p>To compute DSI, you will first need to calculate your <a href=\"https:\/\/www.shipbob.com\/inventory-kpis\/inventory-turnover-ratio\/\">inventory turnover ratio<\/a> using a different formula:<\/p>\n\n\n\n<p><strong>Inventory turnover = Cost of Goods Sold \/ Average inventory value<\/strong><\/p>\n\n\n\n<p>To calculate average inventory value, simply add your beginning inventory valuation to your ending inventory valuation, and divide the sum by 2.<\/p>\n\n\n\n<p>Let\u2019s walk through an example. A fictitious company reports that<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.shipbob.com\/blog\/beginning-inventory\/\">Beginning inventory<\/a> = $1,000<\/li>\n\n\n\n<li><a href=\"https:\/\/www.shipbob.com\/blog\/ending-inventory\/\">Ending inventory<\/a> = $3,000<\/li>\n\n\n\n<li><a href=\"https:\/\/www.shipbob.com\/blog\/cost-of-goods-sold\/\">Cost of Goods Sold (or \u201cCOGS\u201d)<\/a> = $50,000.<\/li>\n<\/ul>\n\n\n\n<p>Therefore, this company would calculate inventory turnover like so:<\/p>\n\n\n\n<p>Inventory turnover = (50,000) \/ ((3,000+1,000) \/ 2)<\/p>\n\n\n\n<p>Inventory turnover = 50,000 \/ 2,000<\/p>\n\n\n\n<p><strong>Inventory turnover = 25<\/strong><\/p>\n\n\n\n<p>Having calculated inventory turnover, let\u2019s say this company wanted to calculate their DSI for the past year (365 days):<\/p>\n\n\n\n<p>DSI = 365\/25<\/p>\n\n\n\n<p><strong>DSI = 14.6<\/strong><\/p>\n\n\n\n<p>This means that it takes an average of 14.6 days for this retailer to sell through its stock.<\/p>\n\n\n\n<p>Note: You can source inventory value from your company\u2019s balance sheet and COGS value from your annual financial statements. Average inventory value should include <a href=\"https:\/\/www.shipbob.com\/blog\/raw-materials-inventory\/\">raw materials<\/a>, <a href=\"https:\/\/www.shipbob.com\/blog\/work-in-process-inventory\/\">work-in-process (WIP) inventory<\/a>, and <a href=\"https:\/\/www.shipbob.com\/blog\/finished-goods-inventory\/\">finished goods<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-the-average-number-of-days-to-sell-inventory\">What is the average number of days to sell inventory?<\/h2>\n\n\n\n<p>The average number of days to sell inventory varies from industry to industry.<\/p>\n\n\n\n<p>Within a particular industry or vertical, businesses and retail companies will sometimes compare their own DSIs to their competitors\u2019 (for example, Walmart may compare its DSI to Costo\u2019s).<\/p>\n\n\n\n<p>But if the DSIs are different, it doesn\u2019t necessarily mean one company\u2019s <a href=\"https:\/\/www.shipbob.com\/inventory-management\/\">inventory management<\/a> is any less efficient than the other. The variation could be because of differences in <a href=\"https:\/\/www.shipbob.com\/blog\/supply-chain-operations\/\">supply chain operations<\/a>, products sold, or customer buying behaviour.<\/p>\n\n\n\n<p>For example, in 2018, <a href=\"https:\/\/s2.q4cdn.com\/056532643\/files\/doc_financials\/2018\/annual\/WMT-2018_Annual-Report.pdf\">Walmart\u2019s<\/a> DSI is lower than <a href=\"https:\/\/s2.q4cdn.com\/299287126\/files\/doc_financials\/annual\/2018-Annual-Report.pdf\">Amazon\u2019s<\/a>. This is because Walmart\u2019s sales mix has a higher share of perishable goods which cannot be kept for too long in its warehouses.<\/p>\n\n\n\n<p>Walmart\u2019s merchandise is also bought in bulk by customers who visit its brick and mortar retail stores, unlike with Amazon where customers purchase just one or two items at a time and expect door-step delivery. The delivery time adds to Amazon\u2019s DSI.<\/p>\n\n\n\n<p>While there is not necessarily one perfect DSI, companies typically try to keep low days sales in inventory. A lower DSI indicates that inventory is selling more quickly, which is usually more profitable than the alternative.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-days-sales-in-inventory-vs-inventory-turnover\">Days sales in inventory vs. inventory turnover<\/h2>\n\n\n\n<p>Inventory turnover and DSI are similar, but they do not measure the same thing. DSI measures the average number of days it takes to convert inventory to sales, whereas the inventory turnover ratio shows the number of times inventory is sold and then replaced in a specific time period.<\/p>\n\n\n\n<p>DSI is also inversely proportional to inventory turnover. This means that when DSI is low, inventory turnover will be high, and high DSI makes for low inventory turnover.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-can-shipbob-help-with-optimizing-dsi\">How can ShipBob help with optimising DSI?<\/h2>\n\n\n\n<p>ShipBob helps ecommerce companies manage inventory so that they can meet the increasing consumer demand without slowing down. Here are some of the strategies ShipBob can help you implement to improve your DSI, as well as your overall inventory management.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-distribute-inventory-across-fulfillment-centers\">Distribute inventory across fulfilment centres:<\/h3>\n\n\n\n<p>ShipBob has a wide network of <a href=\"https:\/\/www.shipbob.com\/blog\/choose-order-fulfillment-center-location-outsourcing-3pl\/\">fulfilment centres<\/a>, with dozens of locations all powered by proprietary <a href=\"https:\/\/www.shipbob.com\/warehouse-management\/warehouse-management-system-wms\/\">WMS<\/a> technology across the US and internationally.<\/p>\n\n\n\n<p>This means that you can strategically allocate your inventory to ensure that each geographical location has optimally high <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-levels\/\">inventory levels<\/a>. This helps prevent stock from accumulating or going obsolete, which in turn lowers DSI.<\/p>\n\n\n\n<p>Distributing inventory strategically also has other added benefits, the most significant being reduced shipping costs, <a href=\"https:\/\/www.shipbob.com\/warehouse-operations\/inventory-storage\/\">storage costs<\/a>, and transit times.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-style-blog is-layout-flow wp-block-quote-is-layout-flow\">\n<p><em><span>\u201cShipBob has multiple fulfilment centres in the US, one in Canada, one in the EU, and one in the UK. All locations filter back into one centralised warehouse management system, so everything is under the ShipBob umbrella. By distributing our inventory across these countries and regions, all of our customers are able to get their orders much faster while paying reasonable <a href=\"https:\/\/www.shipbob.com\/blog\/domestic-shipping\/\" target=\"_blank\" rel=\"noreferrer noopener\">domestic shipping<\/a> rates.\u201d<\/span><\/em><\/p>\n\n\n\n<p><span>Wes Brown, Head of Operations at <a href=\"https:\/\/www.shipbob.com\/blog\/black-claw\/\">Black Claw LLC<\/a><\/span><\/p>\n<\/blockquote>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-track-inventory-metrics-in-real-time\">Track inventory metrics in real-time<\/h3>\n\n\n\n<p>ShipBob\u2019s <a href=\"https:\/\/www.shipbob.com\/inventory-management\/software\/\">inventory management software<\/a> (or IMS) provides updated data so that you can make more informed decisions when managing your inventory.<\/p>\n\n\n\n<p>From <a href=\"https:\/\/www.shipbob.com\/inventory-management\/real-time\/\">real-time inventory<\/a> counts to daily inventory histories, ShipBob\u2019s analytics dashboard offers you critical metrics at a glance, as well as detailed inventory reports for downloading.<\/p>\n\n\n\n<p>This gives you the information you need to calculate and monitor DSI, as well as other critical metrics such as inventory turnover, COGS, and average inventory valuation.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-style-blog is-layout-flow wp-block-quote-is-layout-flow\">\n<p><em><span>\u201cShipBob\u2019s dashboard is super intuitive and easy to navigate. love that you can view orders based on when they are processing, completed, on hold, and in other stages. It is super helpful for us to have that and track the order every step of the way. <\/span><\/em><\/p>\n\n\n\n<p><em><span>We have a Shopify store but do not use Shopify to track inventory. In terms of tracking inventory, we use ShipBob for everything \u2014 to be able to track each bottle of perfume, what we have left, and what we\u2019ve shipped, while getting a lot more information on each order.\u201d<\/span><\/em><\/p>\n\n\n\n<p><span>Ines Guien, Vice President of Operations at <a href=\"https:\/\/www.shipbob.com\/blog\/dossier\/\">Dossier<\/a><\/span><\/p>\n<\/blockquote>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-manage-skus-based-on-future-forecasts\">Manage SKUs based on future forecasts<\/h3>\n\n\n\n<p>Will you need more units of a product next month? Or will you need less? How do you plan your inventory in such a way that <a href=\"https:\/\/www.shipbob.com\/inventory-kpis\/dead-stock\/\">deadstock<\/a> and backorders can be avoided?<\/p>\n\n\n\n<p><a href=\"https:\/\/www.shipbob.com\/inventory-management\/inventory-forecasting\/\">Inventory forecasting<\/a> is the best way to ensure that your <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-to-sales-ratio\/\">stock<\/a> levels are optimal at every location you operate in, and that inventory keeps moving through your supply chain.<\/p>\n\n\n\n<p>ShipBob\u2019s <a href=\"https:\/\/www.shipbob.com\/blog\/demand-forecasting\/\">demand forecasting<\/a> tools help you accurately predict future customer demand, taking into account historical sales data, planned promotions, and external factors such as trends, seasonal spikes or dips, and geographic variants.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-set-inventory-replenishment-points\">Set inventory replenishment points<\/h3>\n\n\n\n<p>Especially for ecommerce businesses, you want to reorder SKUs at just the right time. Too early, and you may wind up with too much working capital tied up in inventory, or a <a href=\"https:\/\/www.shipbob.com\/blog\/surplus-inventory\/\">surplus of stock<\/a> that goes <a href=\"https:\/\/www.shipbob.com\/blog\/obsolete-inventory\/\">obsolete<\/a>, and your DSI grows; too late, and you risk <a href=\"https:\/\/www.shipbob.com\/inventory-kpis\/stockout-costs\/\">stocking out<\/a> of items and disappointing customers with <a href=\"https:\/\/www.shipbob.com\/inventory-kpis\/backorder\/\">backorders<\/a>.<\/p>\n\n\n\n<p>To time inventory replenishment correctly, you need to calculate <a href=\"https:\/\/www.shipbob.com\/blog\/reorder-point-formula\/\">reorder points<\/a> and <a href=\"https:\/\/www.shipbob.com\/inventory-kpis\/safety-stock\/\">safety stock<\/a> carefully every time.<\/p>\n\n\n\n<p>ShipBob not only helps merchants calculate reorder points for each product based on inventory days on hand, historical sales, safety stock, etc., but also allows merchants to set automatic reorder notifications for each <a href=\"https:\/\/www.shipbob.com\/blog\/how-to-find-sku-number\/\">SKU<\/a> so that you never miss your perfect reorder time window.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-style-blog is-layout-flow wp-block-quote-is-layout-flow\">\n<p><em><span>\u201cShipBob\u2019s analytics tool is really cool. It helps us a lot with planning inventory reorders, seeing when SKUs are going to run out, and we can even set up email notifications so that we\u2019re alerted when a SKU has less than a certain quantity left. There is a lot of value in their technology.\u201d<\/span><\/em><\/p>\n\n\n\n<p><span>Oded Harth, CEO &amp; Co-Founder of <a href=\"https:\/\/www.shipbob.com\/blog\/mdacne\/\">MDacne<\/a><\/span><\/p>\n<\/blockquote>\n\n\n\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.shipbob.com\/quote\/\"><strong>Request Fulfilment Pricing<\/strong><\/a><\/div>\n\n\n\n<section class=\"wp-block-shipbob-blocks-section-container section section-container  max-width-blog\"><div class=\"container section-info section-info-align-none \"><h6 class=\"section-title \"><\/h6><h2 class=\"section-content h2\">Days in sales inventory FAQs<\/h2><p class=\"section-copy\">Here are answers to the most common questions about days in sales inventory.<\/p><\/div><div class=\"container flex-container direction-col justify-none align-none flex-wrap\">\n\n<div class=\"wp-block-shipbob-blocks-single-faq single-faq direction-col  col-8\" data-controller=\"faq-controller\" data-faq-controller-open-value=\"true\"><div class=\"single-faq-title-contianer\"><h4 class=\"single-faq-title\">Why is days sales in inventory (DSI) useful?<\/h4><div class=\"single-faq-expand\" data-faq-controller-target=\"expand\"><img decoding=\"async\" src=\"\/wp-content\/themes\/shipbob-2022\/resources\/svg\/plus-solid.svg\" \/><\/div><\/div><div class=\"single-faq-childs\" data-faq-controller-target=\"answer\"><div>\n\n<p>DSI is a useful metric to help with forecasting customer demand, timing inventory <a href=\"https:\/\/www.shipbob.com\/blog\/retail-replenishment\/\">replenishment<\/a>, and assessing how long an <a href=\"https:\/\/www.shipbob.com\/inventory-management\/lot-tracking\/\">inventory lot<\/a> will last.<\/p>\n\n\n<p>Calculating DSI gives you a benchmark for how long it takes on average to sell your whole inventory; with this information, you can make adjustments to increase cash flows, lower costs, deliver quick profits, avoid stockouts, and reduce instances of obsolete inventory.<\/p>\n\n<\/div><\/div><\/div>\n\n<\/div><div class=\"cta-container u-hidden\"><a class=\"btn btn-primary \" href=\"\"><\/a><\/div><\/section>\n","protected":false},"excerpt":{"rendered":"<p>Learn what days in sales inventory (DSI) is, how to calculate it, and how it helps businesses forecast demand and time replenishment.<\/p>\n","protected":false},"author":194,"featured_media":1207,"parent":0,"template":"","meta":{"content-type":"","inline_featured_image":false,"footnotes":""},"blogcategories":[8],"class_list":["post-1206","blog","type-blog","status-publish","has-post-thumbnail","hentry","blogcategories-inventory"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.5 (Yoast SEO v27.5) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Days Sales in Inventory: Formula + Best Practices<\/title>\n<meta name=\"description\" content=\"Learn what days in sales inventory (DSI) is, how to calculate it, and how it helps businesses forecast demand and time replenishment.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.shipbob.com\/au\/blog\/days-sales-inventory\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Days Sales in Inventory: Averages, Formula &amp; 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