When it comes to days of supply, it’s always worth noting the value it brings to retail businesses. More importantly, is the value retailers find in keeping firm control of it. That’s because failing to control it can see you paying dearly. And we’re not only talking about money. It can also damage any reputation you’ve built for yourself.
What is Days of Supply (and why is it so important?)
When it comes to a retail term such as ‘Days of Supply’, it isn’t all that hard to understand. Often shortened to DOS, it simply refers to the number of days it will take you to sell out of your current stock on shelf.
Simpler still, it’s the number of days a product is expected to last before you need to restock your shelf. And, by the way, it’s not a guesstimation or based on a thumbsuck. It takes various factors into consideration, such as individual unit movement and product and fixture dimensions, to give you an accurate number.
There are also various circumstances that influence it, such as Seasonality, Out of Stocks and if you’re doing a cross promotion.
As for its value (and importance), you can’t take it for granted. Why? As we’ve already mentioned, DOS is a measure that you can use to know when to replenish stock. But it’s more than that. By always being aware of it, you’ll know how often your stock turns.
So what happens if you don’t have control? Will it really be that bad? The short answer is absolutely.
In not having control of your DOS, you can find your stores running out of stock. That’s because with no data to go on, you won’t have any idea of how quickly your products will leave your shelves. One product might be a fast mover while another is slow to move off the shelf. And before you know it, you could find gaps on all your shelves. On the other hand, you won’t know how much to order or even reorder to meet customer demand.
You could even find yourself overcompensating, and running the risk of stocking your stores with too much of the wrong product. And that will cost you money that you shouldn’t need to spend.
How is Days of Supply calculated (and what does it measure)?
The days of supply formula is this: DOS = Capacity / Units Sold Per Day.
If we were to expand on that, it would be to say that capacity refers to the number (total count) of units of a product that’s on a planogram. Your units sold per day is self explanatory and would add up to your weekly movement.
As for the formula, it allows you to measure three specific aspects of your retail business. They are:
- The days of supply of your individual products;
- The average days of supply for you shelf and gondola, and
- The overall days of supply for your store.
So what does that look like in a practical example? Here you go: as shown in our infographic below, Cereal Brand A has a product on the shelf. This product has a weekly movement of 54.08 units and a DOS of 0.91 days. Let’s say it also has one facing and the shelf capacity is seven. That means that on average, the product with its current facings will sell 54 units a week and you have enough stock on shelf to last less than one day.
Should you increase the number of facings, and thus the capacity, your DOS would increase too. If you wanted to increase your facings to three, for example, your capacity would jump to 21 and your DOS would increase to 2.72.
Just be careful of overstocking your shelf to the point that it looks messy and thus becomes unappealing.
How will you know if your DOS is accurate?
To ensure that your days of supply is accurate, there are a few things that must be correct. In fact, your DOS is reliant on the accuracy of these aspect because without them, your days of supply will be skewed.
These aspects are:
- Capacity. This includes both your product and fixture dimensions as without them you won’t know how many products you can fit on your shelf;
- Number of units you’ve sold; and
- Period. Your time period is used to work out your number of units per day.
When space planning, it is vital to align your DOS across the planogram as much as possible. This averaging out will allow all of your products to decrease at the same rate, thereby reducing the possibility of gaps and preventing you from replenishing your shelf too often.