James
3 min read
Mar 1, 2022

Key Points:

  • Inventory days on hand, otherwise known as days of inventory on hand, is the measurement of how fast a business can turn inventory
  • The inventory days on hand formula prevents fewer stockouts and allows eCommerce merchants like yourself to have the correct inventory in stock
  • You can significantly reduce the amount of money you spend on warehousing by maintaining a low average of inventory days on hand

Accurate stock levels ensure your customers can purchase items they desire without needing the “Back in Stock” notifications and save your customers from disappointment. So if your eCommerce business is performing well, your inventory would report a low DOH, which means it takes a short period to sell stock.

We’ll go over how to calculate inventory days on hand so that you can turn your inventory in no time.

What Are Inventory Days On Hand?

Inventory days on hand, otherwise known as days of inventory on hand, is the measurement of how fast a business can turn inventory. Companies can calculate their inventory days on hand to minimize stock-outs while optimizing their inventory management.

Inventory Days on Hand

Plus, the fewer days of inventory on hand, the better for your eCommerce business. We’ll go over how to calculate your inventory on average and why it's important in the next section.

Why Inventory Days On Hand Is Important

There are many reasons why calculating your inventory days on hand is beneficial for establishing an optimized inventory management system. Whether you’re a small or large eCommerce business, predicting accurate inventory count helps predict customer demand, which is especially vital during peak season or major holidays.

We’ll go over the other reasons why inventory forecasting is essential for your business and the best practices in this section.

1. Helps plan for the future

Calculating your inventory turnover ratio helps businesses forecast demand during peak sales periods like Black Friday through the Christmas season. In addition, understanding the average number of days helps you have a better idea of your company’s inventory 365 days a year.

Days on Hand Calculation Example

2. Helps optimize your inventory management

Calculating your inventory days on hand helps eCommerce companies and merchants make informed decisions about inventory purchases. Purchasing too much inventory can be a significant drain on your resources. It can financially impact your business if the product is no longer in demand, which is where the DOH formula comes in handy.

3. Prevents fewer stockouts

The inventory days on hand formula prevents fewer stockouts and allows eCommerce merchants like yourself to have the correct inventory in stock. Fewer stockouts translate to a better customer experience.

4. Lowers costs & improves cash flows

You can significantly reduce the amount of money you spend on warehousing by maintaining a low average of inventory days on hand. So instead of paying an arm and a leg on warehousing, you can invest the freed-up cash in other areas of your eCommerce business.

5. Reduces risk of spoilage

Depending on the type of eCommerce business you run, calculating your DOH formula helps prevent any spoilage if you hold food or perishable goods in stock. The longer the items stay in inventory, the increased risk of spoilage or deadstock. This factor also applies to seasonal items (i.e., Christmas goods).

Related post: Inventory Turnover - 10 Strategies to Help Your eCommerce Business

How to Calculate Inventory Days On Hand Formula

Merchants can easily calculate inventory days on hand with a single formula and don’t require any complicated calculations.

Days on hand = (Average inventory of the year / Cost of goods sold) x 365

We’ll go over a sample calculation so you can better understand how to calculate this DOH formula.

Days on hand calculation example

Let's say your company has an inventory worth $50,000, and its cost of goods sold is worth $500,000 for the year 2021. Using the DOH formula, we'll calculate the average number of days.

Inventory days on hand: 50,000 / (500,000) x 365 = 36.5 days

Inventory On Hand with Easyship

By now, you should know everything about the importance of inventory days and how you can create an optimized inventory system. The DOH formula can help you accurately predict your inventory stock levels so you can focus on other areas of your business, and so you don't pay a fortune on warehousing

While creating a well-rounded fulfillment system is vital, a shipping platform like Easyship can help you scale your business further with premium shipping tools. With a free Easyship account, you gain instant access to benefits like:

  • Easyship Shipping Dashboard: Manage all your orders and shipping activity from our shipping dashboard. Import orders, upload CSVs, or sync directly from your eCommerce store
  • Fulfillment Built for Growth: Easyship has warehouse partners on four continents so that you can reach your customers all across the world. Plus, Easyship helps scale up fulfillment capabilities without increasing overhead costs
  • Powerful Shipping Automation: Our shipping software allows you to automate your shipping manage orders & tracking while handling all the necessary paperwork so you can focus on scaling your business globally

Overall, understanding your company’s inventory is the right step toward decreasing your inventory turnover ratio.

Ready to ship? Sign up for a FREE Easyship account and get instant access to high-volume discounts for domestic and international shipping

Inventory Days On Hand FAQ

Should inventory days be high or low?

Inventory levels should be low because the fewer days a company holds inventory, the better your eCommerce business.

What do inventory days mean?

Inventory days on hand measure how fast a company is selling its products. Keeping a balance sheet of your sales of inventory can put you one step closer to an optimized inventory system.

Why would days in inventory increase?

Days in inventory will increase if it takes your business longer to turn inventory.

If you found this article informative, you may enjoy the following:

TABLE OF CONTENTS

Key Points:

  • Inventory days on hand, otherwise known as days of inventory on hand, is the measurement of how fast a business can turn inventory
  • The inventory days on hand formula prevents fewer stockouts and allows eCommerce merchants like yourself to have the correct inventory in stock
  • You can significantly reduce the amount of money you spend on warehousing by maintaining a low average of inventory days on hand
Get Your Ship Together.

By submitting the form, you agree to receive marketing emails from Easyship.

Save up to 91% on Shipping. Try for free.

Effortlessly compare 550+ courier services with one global account. Instant discounts. Start in minutes.

Shipping Internationally? Unsure What Tariffs or Duties Apply?
Try our FREE Tax & Duty Calculator

Trying to stay up to date on the latest cross-border shipping and import requirements? Get an instant estimate of all applicable taxes and duties for every country across 220+ global destinations or sign up and take advantage of our in-built HS Code lookup tool.

Calculate Tax & Duties Instantly (Free Tool)
Ready to Stop Overpaying for Shipping?
Try our FREE Shipping Rate Calculator

Looking for the cheapest way to ship a package? Get an instant shipping quote and compare rates from 550+ courier services across the United States, Canada, UK, Australia, and more. Simply add your package size and delivery location, and you'll find the best deal in seconds.

Calculate Rates Instantly (Free Tool)
Planning Your Campaign?

Get in touch with us now and our shipping consultants can give you a detailed quote and additional info to help with your campaign.

Get in touch
The Cheapest Shipping from USPS, UPS & FedEx

Find the guaranteed cheapest rates for any courier in seconds with Easyship’s free shipping rate calculator. Compare discount rates from USPS, UPS, FedEx, and 250+ couriers at a glance.

GET RATE QUOTES FREE
The Cheapest Shipping from USPS, UPS & FedEx

Find the guaranteed cheapest rates for any courier in seconds with Easyship’s free shipping rate calculator. Compare discount rates from USPS, UPS, FedEx, and 250+ couriers at a glance.

GET RATE QUOTES FREE
Get in touch with our fulfillment experts!

We believe simple pricing is the best pricing. Get a quote with a simplified pricing structure and no hidden fees.

Contact us
Need help fulfilling your crowdfunding campaign?

We provide the necessary tools needed to keep you on budget for shipping and to safely deliver your product to backers around the world.

Learn more
Try our duty & tax calculator!

Need to estimate your shipping duties & taxes? Our calculator can give you an idea of what to expect.

TRY IT NOW
Save up to 91% on Shipping. Try for free.

Compare 550+ courier services with one global account. Start in minutes.

GET STARTED FOR FREE
Get a Free Quote for Your Campaign

Receive a personal cost estimate for your crowdfunding campaign from our trusted global fulfillment partners. Easyship is a certified Indiegogo partner.

GET FREE QUOTE
Looking for great rates from a top courier?

Save up to 74% on UPS shipping rates by shipping with Easyship. You can run a quote and generate your first shipments in literally minutes!

SHIP WITH UPS TODAY
The cheapest way to ship for eCommerce

Get instant access with volume-discounted shipping rates. Save up to 89% off on USPS, UPS, FedEx, and more. Easyship is free for 50 shipments each month.

SIGN UP FREE TO SAVE
Find your perfect fulfillment partner with expert help

Let Easyship connect you to the largest shipping and fulfillment network on Earth. You’ll find trusted partners for all things logistics. Guidance is free from our global shipping experts.

ASK AN EXPERT
Don’t miss our money and time-saving features!

Explore the powerful features that 100K+ merchants use to ship smarter, not harder. Shipping automation, live rates at checkout, live duty and tax – all free to try with Easyship.

EXPLORE ALL FEATURES
Start saving on shipping in seconds

Create your free Easyship account to streamline shipping and save with discounted rates. No hidden fees. No minimums. Just savings.

CREATE YOUR FREE ACCOUNT
Create Your Shipping Policy Free

Use our guided walk-through to build the perfect shipping policy for your eCommerce business.

CREATE YOUR POLICY FREE
Looking to intergrate your Shopify store?

With 550+ pre-negotiated shipping services available with discounts of up to 91%, you can save time & money today when you integrate your Shopify store with Easyship

REGISTER FOR FREE
Use Easyship Free Every Month

Easyship is free to use for 50 shipments every month. You’ll save big on our discounted shipping rates up to 91% off, and save time with smart automation. Signup is fast and free.

CREATE YOUR FREE ACCOUNT
Don’t miss the key steps to fulfillment success

Follow the easy path to fulfillment success. Easyship’s free fulfillment checklist provides a proven step-by-step so you can ship at scale without the guesswork.

VIEW THE CHECKLIST
Ship for less with any courier, guaranteed

Save up to 89% off all shipping rates. Easyship offers the guaranteed cheapest volume-discounted rates on the market from USPS, UPS, FedEx, and 250+ global couriers.

SIGN UP TO SAVE
Don’t miss all our money and time-saving features!

Explore the innovative features that 100K+ merchants use to ship smarter, not harder. Shipping automation, live rates at checkout, live duty and tax – all free to try with Easyship.

EXPLORE FEATURES
Want the cheapest rates?

Register for an Easyship account today and you will gain access to the cheapest rates, instantly.

REGISTER FOR FREE
Watch out for international duty and tax!

What exactly does it cost to ship cross-border? Use the free duty and tax calculator from Easyship to view accurate import costs for any shipment to anywhere.

USE FREE
Protect Your Crowdfunding Budget from Cost Creep

Prices are rising, deliveries are slowing. Get up to speed on the state of crowdfunding shipping with expert Easyship analysis and keep your campaign on budget.

LEARN MORE
Discover the Cheapest Shipping from USPS, UPS & FedEx

Find the guaranteed cheapest rates for any courier in seconds with Easyship’s free shipping rate calculator. Compare discount rates from USPS, UPS, FedEx, and 550+ courier services at a glance.

GET A FREE QUOTE
Discover Your Cheapest Way to Ship

Find the guaranteed cheapest shipping in seconds with Easyship’s free shipping rate calculator. Compare discounted rates from USPS, UPS, FedEx, and 250+ global couriers at a glance.

COMPARE RATES FREE
Compare the best rates in seconds

Get an instant estimate of the cheapest shipping rates with our free calculator tool.

GET FREE RATE QUOTES
Save money on every shipment

Save up to 91% off shipping with Easyship’s discount courier rates. Create your free account to save instantly on 550+ courier services, including USPS.

CREATE YOUR FREE ACCOUNT
Ready to ship internationally?

Get help from our global shipping experts on warehousing, global shipping and to connect with our network of trusted 3PLs.

GET FREE SHIPPING TIPS
How’s Your Covid Shipping Policy?

Use our free shipping policy generator to formulate your safest, most customer-friendly shipping policy in seconds.

GET YOUR SHIPPING POLICY
Try Pre-generated Return Labels For Free

Register for an Easyship account today and get 30-days access to a Premier plan with access to Pre-generated Return Labels.

Generate Return Labels Today
Discover the Cheapest Shipping from USPS, UPS® & FedEx

Find the guaranteed cheapest rates for any courier in seconds with Easyship’s free shipping rate calculator. Compare discount rates from USPS, UPS, FedEx, and 250+ couriers at a glance.

GET RATE QUOTES FREE
Get Up to Speed On Covid Shipping

Explore our Covid shipping resources to make sure your shipment arrives on time and in good condition.

LEARN MORE
Free Shipping for the Holidays 101

Learn how the leading brands offer free shipping, calculate costs, and ship on a budget for the holidays in our free shipping guidebook.

LEARN MORE
Your Perfect Shipping Policy, Ready in Minutes

Use Easyship’s free shipping policy generator to formulate your perfect holiday shipping policy for returns, tracking, and more. Just follow the prompts and you’re done!

GET YOUR SHIPPING POLICY
Scale Your Growth Internationally With Pro Tips

Learn how to ship internationally without missing a step. Our case studies show you proven tactics for shipping worldwide from Easyship users who did it right.

READ CASE STUDIES
No items found.
Share on:

Related Articles

No items found.