In one sentenceThe average number of days goods stay in the warehouse before they are sold, calculated by dividing inventory by cost of sales and multiplying by 365.
Simply put
It is the other side of inventory turnover: instead of saying "inventory turned 4 times" you say "goods stay about 90 days". Days are easier to understand and to link to the cash cycle.
A long period means money frozen on the shelves, and a greater risk of damage, expiry or outdated models.
Worked example
A distribution business has an annual cost of sales of 1,460,000 SAR, and its inventory at year end is 360,000 SAR.
Daily cost of sales = 1,460,000 ÷ 3654,000 SAR
Inventory360,000 SAR
Inventory period = 360,000 ÷ 4,00090 days
Formula: Inventory ÷ cost of sales × 365
Don't confuse it with
Inventory turnoverTurnover is a number of times a year, and the inventory period is a number of days; 365 ÷ turnover = inventory period.
in FullScreen ERP
Automatic reordering suggests quantities based on the turnover rate and the reorder level. Purchasing and suppliers