Days Sales of Inventory (DSI): Formula, Examples & How to Improve

Days Sales of Inventory (DSI) measures how many days, on average, inventory sits before being sold. It is also called days inventory outstanding (DIO), inventory days, or days in inventory.

DSI formula

DSI = Average Inventory ÷ Cost of Goods Sold × Number of Days

For an annual calculation, use 365 days.

DSI example

Suppose a retailer has:

• Average inventory: $120,000
• Annual COGS: $730,000

DSI = $120,000 ÷ $730,000 × 365 ≈ 60 days

This means the business holds about 60 days of inventory on average before selling it.

How to calculate average inventory

A simple method is:

Average Inventory = (Beginning Inventory + Ending Inventory) ÷ 2

For businesses with seasonality or rapidly changing stock, use monthly or weekly inventory balances instead of only beginning and ending values.

See average inventory formula.

DSI vs inventory turnover

DSI and inventory turnover describe the same operating reality from different directions.

Metric	What it shows
DSI	Average number of days inventory is held
Inventory turnover	How many times inventory cycles through during a period

Higher turnover generally corresponds to lower DSI, and vice versa.

See inventory turnover ratio.

What is a good DSI?

There is no universal ideal DSI. The right number depends on:

• product category
• supplier lead time
• seasonality
• shelf life
• service-level expectations
• minimum order quantities
• business model

Compare DSI against your own historical performance, category norms, and stockout risk rather than chasing a generic benchmark.

When lower DSI is good

Lower DSI can mean:

• inventory is moving quickly
• less cash is tied up in stock
• carrying costs are lower
• less inventory is exposed to obsolescence or spoilage

When lower DSI can be risky

Very low DSI can also mean the business is running too lean. If inventory coverage falls below supplier lead time, stockouts may increase.

That is why DSI should be reviewed alongside stockout rate, weeks of supply, lead time, and safety stock.

What high DSI can indicate

• overbuying
• slow-moving products
• weak demand forecasting
• seasonal stock bought too early
• excess safety stock
• poor product assortment
• supplier minimums that force oversized orders

How to reduce DSI without creating stockouts

Improve demand forecasting

Use recent demand and seasonality rather than repeating last year's order quantities automatically.

Reduce excess stock

Identify SKUs whose inventory coverage is much higher than their demand justifies.

Shorten supplier lead times

Faster replenishment can support lower inventory without reducing availability.

Order smaller quantities more often

When supplier economics allow it, smaller and more frequent orders can reduce average inventory.

Transfer stock between locations

Move existing surplus before buying more inventory.

Use markdowns strategically

For genuinely slow-moving or seasonal products, controlled markdowns can recover cash sooner.

DSI by SKU, category and location

Companywide DSI can hide important differences. One category may turn every 20 days while another sits for 150 days.

Segment DSI by:

• SKU
• category
• location
• supplier
• season

This makes the metric more actionable.

DSI and inventory carrying cost

Longer holding periods usually increase storage, capital, insurance, handling, shrinkage, spoilage and obsolescence exposure.

See inventory carrying cost.

DSI and cash flow

Inventory represents cash that has been converted into stock. A high DSI often means working capital is tied up for longer before the business converts inventory back into cash through sales.

Reducing DSI can improve cash efficiency, but only if service levels remain acceptable.

How Stash helps

Stash gives growing physical businesses visibility into inventory, purchasing, suppliers, forecasting and locations so operators can see where stock is moving too slowly and where coverage is becoming risky.

Frequently asked questions

Is a lower DSI always better?

No. Lower DSI is generally more capital efficient, but if inventory falls below what demand and lead time require, stockouts can increase.

Is DSI the same as DIO?

Yes. Days inventory outstanding is another common name for the same metric.

Should I use retail value or inventory cost in DSI?

Use inventory measured on a basis consistent with COGS, typically inventory at cost.

How often should I calculate DSI?

Monthly is common, but fast-moving or seasonal businesses may benefit from more frequent monitoring.

Next steps

Calculate DSI by category and location, then compare it with weeks of supply, inventory turnover, and dead stock.