Days of Inventory on Hand (DOH)

KPI Categories

This KPI is associated with the following categories and industries in our KPI database:

Days of Inventory on Hand (DOH) Interpretation

High DOH values suggest overstocking, which can lead to increased holding costs and potential obsolescence. Conversely, low DOH indicates efficient inventory management and quicker turnover, but may also risk stockouts. Ideal targets typically vary by industry, but maintaining a DOH of 30-45 days is often seen as optimal.

<30 days – Excellent inventory management; consider scaling operations
31-45 days – Healthy range; monitor for demand fluctuations
>45 days – Potential overstock; assess purchasing strategies

Days of Inventory on Hand (DOH) Benchmarks

Retail industry average: 60 days (Gartner)
Manufacturing median: 45 days (Deloitte)
Top quartile e-commerce: 30 days (McKinsey)

Common Pitfalls

Many organizations overlook the implications of high DOH, which can mask inefficiencies in supply chain management.

Failing to regularly review inventory levels can lead to excess stock. This not only ties up cash but also increases storage costs and risks obsolescence.
Neglecting to align inventory with demand forecasts results in mismatches. This can lead to stockouts or overstock situations, both of which strain financial resources.
Ignoring supplier lead times can distort inventory planning. Unpredictable delays may cause businesses to overstock to compensate, further inflating DOH.
Overcomplicating inventory processes can create confusion. Inefficient workflows may lead to errors in stock counts and mismanagement of resources.

Improvement Levers

Reducing DOH requires a strategic focus on optimizing inventory processes and enhancing visibility across the supply chain.

Implement just-in-time (JIT) inventory practices to minimize excess stock. This approach aligns inventory levels closely with production schedules, reducing holding costs.
Utilize advanced analytics to forecast demand accurately. Data-driven insights can help align inventory levels with actual sales patterns, improving turnover rates.
Enhance supplier relationships to improve lead times. Strong partnerships can lead to more reliable deliveries, allowing for leaner inventory levels.
Regularly audit inventory management systems for efficiency. Streamlining processes can reduce errors and improve overall operational efficiency.

Days of Inventory on Hand (DOH) Case Study Example

A leading consumer electronics company faced challenges with high Days of Inventory on Hand (DOH), which had reached 75 days. This excess inventory strained cash flow, limiting investments in new product development. The CFO initiated a comprehensive review of inventory management practices, focusing on demand forecasting and supplier collaboration. By implementing a new inventory management system that integrated real-time sales data, the company improved its forecasting accuracy significantly.

Within 6 months, DOH was reduced to 45 days, freeing up $50MM in working capital. The company redirected these funds into innovative product lines, enhancing its market position. Improved supplier relationships also led to shorter lead times, allowing for a more agile response to market trends. The success of this initiative not only improved financial ratios but also positioned the company for sustainable growth in a competitive landscape.

Every successful executive knows you can't improve what you don't measure.

With 20,780 KPIs, PPT Depot is the most comprehensive KPI database available. We empower you to measure, manage, and optimize every function, process, and team across your organization.

Subscribe Today at $199 Annually

KPI Depot (formerly the Flevy KPI Library) is a comprehensive, fully searchable database of over 20,000+ Key Performance Indicators. Each KPI is documented with 12 practical attributes that take you from definition to real-world application (definition, business insights, measurement approach, formula, trend analysis, diagnostics, tips, visualization ideas, risk warnings, tools & tech, integration points, and change impact).

KPI categories span every major corporate function and more than 100+ industries, giving executives, analysts, and consultants an instant, plug-and-play reference for building scorecards, dashboards, and data-driven strategies.

Our team is constantly expanding our KPI database.

Got a question? Email us at support@kpidepot.com.

FAQs

What is a good DOH for my industry?

DOH benchmarks vary by industry. Generally, a range of 30-45 days is considered optimal for most sectors, but specific benchmarks may differ based on operational models.

How can I calculate DOH?

DOH is calculated by dividing average inventory by the cost of goods sold (COGS) and multiplying by the number of days in the period. This provides insight into how long inventory is held before being sold.

What impact does high DOH have on cash flow?

High DOH ties up cash in unsold inventory, which can limit liquidity and hinder operational flexibility. This situation may force companies to rely on external financing, increasing costs.

Can DOH be improved quickly?

While some improvements can be made swiftly, sustainable change typically requires a comprehensive review of inventory practices. Focus on aligning inventory with demand and enhancing supplier relationships for lasting results.

How often should I review my DOH?

Regular reviews, ideally monthly, are recommended to stay aligned with market conditions. Frequent assessments help identify trends and allow for timely adjustments in inventory management.

What role does technology play in managing DOH?

Technology enhances visibility and accuracy in inventory management. Advanced analytics and inventory management systems can provide real-time insights, improving forecasting and reducing DOH.