Question 1

What is days of inventory on hand (DOH)?

Accepted Answer

Days of inventory on hand (DOH) measures how many days your current inventory will last at the current sales rate. Formula: DOH = Current Inventory ÷ Daily COGS (or Current Units ÷ Daily Units Sold). If you have 3,200 units and sell 65/day, you have 49 days of inventory. DOH helps you know when to reorder and whether you're carrying too much or too little stock.

Question 2

What is a good number of days of inventory on hand?

Accepted Answer

The ideal DOH depends on your lead time. A good rule: DOH should equal your lead time + 1-2 weeks buffer. With a 14-day lead time, aim for 21-42 days. Under lead time means you risk stockouts before the next order arrives. Over 2× lead time means too much capital tied up. Fast-fashion brands aim for 30-45 days, electronics 45-60 days, and luxury goods may carry 90+ days.

Question 3

What is the cash conversion cycle?

Accepted Answer

The cash conversion cycle (CCC) measures how long cash is tied up in operations. Formula: CCC = DSI + DSO - DPO (Days Sales Inventory + Days Sales Outstanding - Days Payable Outstanding). For DTC e-commerce: DSI is your inventory days, DSO is ~0-3 days (instant payment), DPO is your supplier payment terms. A negative CCC means you collect from customers before paying suppliers — the ideal scenario.

Question 4

How does sales velocity affect days on hand?

Accepted Answer

Sales velocity directly determines how fast inventory depletes. If velocity increases 50% (e.g., during a sale or viral moment), your 49-day inventory becomes 33 days. This is critical for planning: always check whether current DOH covers your lead time at peak velocity, not just average. The sensitivity table in this calculator shows DOH at different velocity levels so you can plan for demand spikes.

Question 5

How do I reduce days of inventory on hand?

Accepted Answer

Five strategies: 1) Order smaller quantities more frequently. 2) Negotiate shorter lead times to reduce needed buffer. 3) Improve demand forecasting to order closer to actual need. 4) Run promotions to accelerate slow-moving inventory. 5) Drop-ship slow sellers to eliminate carrying inventory entirely. Reducing DOH frees up cash — going from 60 to 40 days on $48K inventory frees $16K in working capital.

Scenario	Daily Units	Days on Hand	Weeks	Covers Lead Time?
50% slower	32.5	98 days	14.1	YES
75% slower	48.8	66 days	9.4	YES
CurrentCurrent	65.0	49 days	7.0	YES
25% faster	81.3	39 days	5.6	YES
50% faster	97.5	33 days	4.7	YES
100% faster	130.0	25 days	3.5	YES

Days of Inventory on Hand Calculator

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