The formula to calculate the Days of Supply is:
\[ D = \frac{I}{U} \]
Where:
Days of Supply is a key inventory management metric that indicates how many days the current inventory will last given the current daily usage rate. This metric helps businesses understand how long their inventory will last before they need to reorder or restock. It is crucial for maintaining optimal inventory levels and ensuring that there are no stockouts or overstock situations. By monitoring the days of supply, businesses can make informed decisions about purchasing, production, and inventory management.
Let's say you have an inventory on hand (I) of 500 units and a daily usage rate (U) of 50 units. Using the formula:
\[ D = \frac{500}{50} = 10 \]
So, the days of supply (D) would be 10 days.
