Days on Hand Explained: The Most Important Inventory Metric
Learn how to calculate, interpret, and act on days on hand data to maintain optimal stock levels.
What is Days on Hand?
Days on Hand (DOH), also known as Days of Inventory or Inventory Days, measures how many days your current stock will last based on your average daily sales rate. It answers the fundamental question: "If I stop ordering today, how long until I run out?"
This metric is essential for inventory management because it translates raw stock numbers into actionable timeframes. Knowing you have 500 units tells you little, but knowing you have 15 days of stock tells you exactly when to reorder.
How to Calculate Days on Hand
The basic formula for calculating days on hand is straightforward:
Days on Hand = Current Stock Quantity ÷ Average Daily Sales
For example, if you have 300 units in stock and sell an average of 10 units per day, your days on hand is 30 days.
Example Calculation:
- Current Stock: 300 units
- Sales Last 30 Days: 300 units
- Average Daily Sales: 300 ÷ 30 = 10 units/day
- Days on Hand: 300 ÷ 10 = 30 days
Interpreting Days on Hand Values
The ideal days on hand varies by industry, product type, and supplier lead times. However, general guidelines can help you classify your inventory health:
Critical: 0-7 Days
Immediate action required. Risk of stockout before next delivery if you have standard lead times. Prioritize reordering these items.
Low: 8-21 Days
Monitor closely and plan reorder soon. Should be ordered within the next few days depending on supplier lead times.
Healthy: 22-60 Days
Optimal range for most products. Enough buffer to handle demand variations without tying up excessive capital.
Overstock: 60+ Days
Consider reducing future orders. Capital is tied up in excess stock. May need promotional pricing to move inventory faster.
Factors That Affect Days on Hand
Several factors influence what constitutes an ideal DOH for your business:
- •Supplier Lead Times: Longer lead times require higher DOH to avoid stockouts
- •Demand Variability: Products with unpredictable sales need more safety stock
- •Product Shelf Life: Perishables require lower DOH to prevent expiry
- •Storage Costs: High carrying costs favor lower DOH
- •Seasonality: Build stock before peak seasons, reduce after
Using Days on Hand for Reorder Decisions
Days on hand becomes most valuable when combined with your supplier lead time. The reorder point formula is:
Reorder Point = Lead Time (days) + Safety Stock (days)
If your supplier takes 14 days to deliver and you want 7 days of safety stock, you should reorder when DOH drops to 21 days. This ensures new stock arrives before you run out, with a buffer for delays.
Common Mistakes with Days on Hand
- •Using too short a sales period, making calculations volatile
- •Not accounting for seasonal variations in demand
- •Applying the same DOH targets to all products regardless of characteristics
- •Ignoring items with zero sales (infinite DOH indicates dead stock)