Luckily, accurate WOS calculations mean you can maintain proper inventory levels because you always know the number of days before you stock out. Increased operational costs hurt your bottom line.
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Or, if you need them to be, that you negotiate vendor contract terms that allow for this. Just be sure your orders aren’t smaller than your supplier’s minimum order quantity. Waiting for inventory to arrive is frustrating – not to mention stressful as you get closer to going out of stock.īy calculating your weeks of supply, companies can reduce supplier lead times by placing smaller orders more frequently.įor one, this strategy radically reduces supplier order lead times (because smaller orders are typically quicker to produce and fulfill).īut as an added bonus, it ties up less working capital in inventory you don’t have on hand yet. And it puts brands at greater risk of running out of stock (under-ordering) or accumulating obsolete inventory (over-ordering). This leaves them placing production orders at a bad time, for the wrong products, or with the incorrect quantities. Without calculating WOS, brands can’t proactively plan for their future inventory needs. But this also means knowing what you’ll need and when. Improve future inventory planningĭTC brands thriving in today’s online retail environment are no strangers to inventory planning.Īt any given time, you need to know how much inventory you’ll need based on current sales trends. One that reduces the time products sit on warehouse shelves before reaching customers and lowers your risk of dead stock. It’s impossible to eliminate spoilage entirely.īut an accurate WOS calculation can create a more efficient ordering system.
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But when you over-order, you end up with spoilage, and that’s what happens. No one wants to pay hefty holding costs for stale inventory or write off perfectly good products at the end of an accounting period. This not only reduces friction in the buying process but increases the likelihood that customers will keep coming back for more. Knowing how long your current supply will last, you can stock in time to prevent a stockout (and avoid having to sell on backorder). The retailers that stand out are the ones that are always in stock when those customers are looking to buy. Minimize stockouts and backordersĬonsumers now have an unprecedented amount of choices when shopping online. That’s because you’ll know how much to reorder and when to meet demand. Meanwhile, demand for seasonal products (like bathing suits or holiday lights) might spike in certain months.īy considering both seasonal forecasts and weeks of supply, you can maintain optimal inventory levels for each product at all times. Your bestsellers likely sell consistently throughout the year. Not every product in your inventory is created equal. Optimize inventory levels for different products Why it is important to accurately calculate weeks of supplyĪccurately calculating your weeks of supply empowers retailers to optimize their inventory levels, minimize stockouts, reduce spoilage, and more. Ideally, your weeks of supply will equal or be slightly more than your average order lead time.įor instance, if it typically takes 5 weeks for purchase orders (POs) to arrive, roughly 6 weeks of supply will satisfy demand until that replenishment comes. How? By reordering more inventory at exactly the right time, so you can keep only enough stock on hand to satisfy demand. This calculation factors in available safety stock and ignores incoming inventory replenishment.Įcommerce retailers can use their WOS calculation to avoid stockouts – without tying up too much working capital or racking up holding costs.
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Weeks of supply (WOS) is an inventory management metric that estimates the number of weeks you’ll stay in stock based on your current inventory levels and historical demand. That’s where calculating weeks of supply comes in. And the waiting is turning you into a big bundle of nerves. You reordered the right amount of inventory, and that shipment is supposedly on its way.īut you’re not sure it’ll arrive in time to avoid a stockout. Picture this: Your inventory levels are running dangerously low. By calculating weeks of supply (WOS), you can minimize stockouts, reduce spoilage, and optimize inventory plans – all of which improve your bottom line.