Defines the number of available days of sales in the inventory, based on the average daily sales value.
What is a high stock days?
A high days inventory outstanding indicates that the Retailer is not able to quickly turn its inventory into sales. This can be due to poor sales performance or the purchase of too much inventory. Having too much idle inventory is detrimental to a company as inventory may eventually become obsolete and unsellable.
What is low stock days?
A low days inventory indicates that the Retailer might encounter Out of Stock situation as it might not have enough quantities to sell until the next delivery of an Item. The risks to have low days inventory are loss of Sales and dissatisfied Customers as they cannot find the Items they are looking for and might decide to shop with other Retailers. This situation if repeated will generate a Category penetration drops.
🧪 Example of Stock Days calculation
If the stock value is 100 and the average daily sales amount is 5, then there are 20 Stock days.
❓Why it is important to manage Stock Days
Stock Days monitoring has an immediate effect on Retailer Cash Flow, it is the reason why Retailer follows closely the Stock Days at every level of the Merchandise Hierarchy and by Supplier.
The target for a Retailer is to have a Stock Day by Supplier lower than their Payment Terms agreement which will free up cash.
A close monitoring of Stock Days enables Retailers to minimize their shrinkage and wastage as well as its loss of profitability as there is no need to have Sales Clearance for a healthy stock.
🎁 Take Aways
Different Categories have different Average Stock Days Level targets, here are the average Stock Days Retailers are usually aiming for:
- Perishables 7 Days
- Beverage 15 Days
- Dry Food 30 Days
- Frozen Food 45 Days
- Personal Care 45 Days
❓How a Retailer can improve its Stock Days
- Know the Stock Days item's position in their product life cycle
- Prioritize the overstock Categories and take actions
- Improve demand forecasting accuracy
- Use automation to improve replenishment
- Use-up excess inventory by redistributing stock
🖥️ Make it happen in Ariane
How to access Stock days in Ariane: 2 Simple Steps
Step 1: Select the Stock Report Menu in the Availability Menu Bar.
Step 2: Select Option in the Filter Menu and choose the period and hierarchy level you want.
And here it is.