What is DOS?
DOS or Days of Supply is a term that is often used by category managers and is commonly used to measure the efficiency in the supply chain.
In simple words, it refers to the number of days it takes for your inventory to run out.
With a clear understanding of DOS, you can improve your inventory management and aim for better efficiency.
With the uberization of freight transportation and the sudden rise of courier drones, same-day deliveries will most likely be pushed to same-hour deliveries in a few years.
That's right, ecommerce business owners, brace yourselves to manage a massively fast-paced supply chain.
How do you calculate Days of Supply?
You can calculate Days of Supply using a simple formula which goes like this:
DOS = Average inventory ÷ Cost of Goods Sold in a Day
To calculate your average inventory, all you have to do is compare the stock you had at the beginning of the accounting period with that at the end of the accounting period and come up with the average.
Once you arrive at your average DOS, you will know just how many days you can run until it's time to stock up again!
Why is it essential to keep track of DOS for your online store?
To run your ecommerce business without hiccups, restock your shelf promptly.
DOS calculation can pretty much tell you when to do that, so you don’t have to guesstimate. In other words, it gives you better control over the business and lets you meet the customer demand by allowing you to stock your shelves with the right products at the right time.
Keep these tips in mind to make sure that you don’t run out of stock:
- Negotiate with your suppliers and bring down the lead time.
- Manage customer orders in such a way that their date of order aligns with the supplier lead time.
- Ensure you place an order with your supplier as soon as you get an order from a customer.
- Calculate Days of Supply and factor in scenarios such as sale, festive season, holidays, etc.
When you can optimize inventory management, you will have mastered your online business’s demand and supply cycle. This would mean not having to hold on to a stock that does not sell or deal with waiting-time for those in need.
How to have better control over Days of Supply?
There is no single word answer to this question. It depends on several factors, such as:
- How much capital do you have to pay for the inventory?
- How long does it take to replenish the stocks?
Take, for instance, a scenario wherein you have ten days of Inventory. However, it would take your suppliers 21 days to resupply you with the products you need. This is known as supplier lead time. If this timeline is not managed well, you may have a gap in customer delivery.
If you are going to run out of inventory in 10 days, you will have to wait another 11 days to meet customer demand. With a good knowledge of the factors involved, you will be better positioned to make decisions about the inventory you must carry.
The more you work it out, the better you get at it. At the end of the day, when you've got everything covered, and you've managed to create a supply chain that's resilient to disruption - your customers are bound to keep coming back for more.
What next? With customers pouring in, be sure never to miss a customer support query as this could eventually cost you more than you think. Upgrade to a better customer experience with the help of DelightChat and make sure your customers are always delighted.
