Days of inventory on hand: the formula and what a healthy number looks like
Days of inventory on hand is current stock divided by your average units sold per day, and the answer is a count of days, not units. This page gives you the formula, a worked example on one SKU, and the one comparison that tells you whether the number is healthy.
What days of inventory on hand means
Days of inventory on hand is the number of days your current stock will last at your current rate of sale. Operators also call it days of stock left, days of cover, or days of inventory remaining. It answers one question: if nothing changes, when does this SKU hit zero.
The operating formula is short:
- Days of inventory on hand = units in stock ÷ average units sold per day
Average units sold per day is your sales velocity. You get it by taking the units sold over a window and dividing by the number of days in that window. A 7-day window reacts fast and jumps around. A 30-day window is steadier and slower to notice a new trend. Pick the window that matches how the SKU actually sells, then keep it consistent so the number means the same thing week to week.
Finance teams use a second version of the same idea across the whole catalogue: average inventory divided by cost of goods sold, multiplied by 365. That gives days of inventory for the business as a balance-sheet figure. It is the right tool for a year-end review and the wrong tool for deciding what to order on Monday. For reordering, work per SKU in units.
A worked example on one SKU
| Input | Value | Where it comes from |
|---|---|---|
| Units in stock | 480 | Your current inventory level |
| Units sold in the last 30 days | 360 | Order history for that window |
| Average units sold per day | 12 | 360 ÷ 30 |
| Days of inventory on hand | 40 | 480 ÷ 12 |
| Supplier lead time | 21 days | What your supplier actually delivers in |
| Slack before you must order | 19 days | 40 − 21 |
What a healthy number looks like
There is no universal healthy figure, and any single number quoted as one should be treated with suspicion. The only comparison that matters is days of inventory on hand against lead time for that SKU.
Read it as slack, not as a score
Subtract lead time from days on hand. What is left is how long you can wait before placing the order.
- Comfortably above lead time. You have room. Order on your normal purchasing rhythm.
- Close to lead time. This is the reorder window. Place the order now or accept a gap.
- Below lead time. You are already late. The stock will run out before the replacement lands, and the only question is how many days of the gap you can shorten.
- Far above lead time. Cash is sitting on a shelf. Not urgent, but worth noticing on slow movers.
Where the number lies to you
Ten days on a product with a 3-day lead time is fine. Sixty days on a product with a 90-day ocean freight lead time is a problem. A SKU with a one-off bulk order in the window will show a velocity it will never repeat. A SKU that sold nothing has no velocity at all, so days on hand is undefined rather than infinite. Treat zero-sales SKUs as a separate list, not as healthy stock.
Related terms
- Sales velocity. Average units sold per day over a chosen window. The denominator in the formula above.
- Lead time. The days between placing a purchase order and stock being sellable again. Supplier-specific, and usually longer than the supplier says.
- Reorder point. The stock level at which you must order to avoid running out. Sales velocity multiplied by lead time, plus any safety stock. Days of inventory on hand is the same maths expressed in days instead of units.
- Safety stock. A buffer on top of lead time demand to absorb a sales spike or a late shipment.
- Weeks of cover. Days of inventory on hand divided by seven. Same number, a unit some buyers prefer.
- Stockout. The SKU hits zero and stays there. The outcome the whole calculation exists to prevent.
For how these inputs combine into an actual order date, read our guide on when to reorder.
Questions
What is the days of inventory on hand formula?
Units in stock divided by average units sold per day. Average units sold per day is the units sold across a window divided by the days in that window, so 360 units in 30 days is 12 per day.
What is a good days of inventory on hand?
Good means comfortably more than the lead time for that SKU. A product you can restock in three days and a product on a ninety-day lead time have completely different healthy numbers, so compare against lead time rather than an industry figure.
How is it different from inventory turnover?
Turnover counts how many times you sell through your stock in a year and looks backwards at the whole catalogue. Days of inventory on hand looks forwards at one SKU and tells you when it runs out.
Should I use a 7, 14 or 30 day sales window?
Shorter windows react faster to a change in demand and are noisier on low-volume SKUs. Longer windows are steadier and slower to spot a new trend. Match the window to how erratically the SKU sells, then keep it fixed so the trend is comparable.
Does the number include stock already on order?
No. The base formula counts only sellable stock on hand. Incoming purchase orders matter for deciding whether to order again, but adding them into days on hand hides the gap you are trying to see.
What does it mean when a SKU shows no days of inventory on hand?
It usually means no sales in the window, so there is no velocity to divide by. That is not a healthy SKU, it is an unmeasured one. Review those separately rather than assuming the stock will last.
How do I get this number for a Shopify store?
Your store data gives you the unit count per variant. Turning that into days of cover means pairing it with units sold over a window and dividing, which is the calculation on this page. Doing it by hand across a few hundred SKUs is where most merchants fall back to a spreadsheet.