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

Days Sales of Inventory (DSI) estimates how many days, on average, inventory remains in the business before being sold.

A common formula is:

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

For a full year, the number of days is usually 365.

DSI example

If average inventory is $150,000 and annual COGS is $900,000:

DSI = ($150,000 ÷ $900,000) × 365 = about 61 days

This means the business holds roughly 61 days of inventory on average.

How to calculate average inventory

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

Using more frequent inventory balances can provide a better average when inventory changes significantly during the year.

DSI vs. inventory turnover

Both metrics describe inventory movement from different angles. See the full inventory turnover ratio guide.

Inventory Turnover = COGS ÷ Average Inventory

DSI ≈ 365 ÷ Inventory Turnover

If turnover is 6 times per year, DSI is about 61 days.

What does a high DSI mean?

A high DSI can indicate slow-moving inventory, excess buying, weak demand, seasonality, or a product mix that takes longer to sell. Persistent high DSI can also be a signal to investigate dead stock and excess inventory.

What does a low DSI mean?

Lower DSI generally means inventory moves faster and less cash is tied up in stock. But very low DSI can signal inventory is too lean, increasing stockout risk.

How to improve DSI

• Improve demand forecasting
• Reduce over-ordering
• Review slow-moving and dead stock
• Update reorder points
• Use smaller, more frequent orders where practical
• Transfer excess stock between locations
• Review supplier minimums and case packs

DSI by category or location

Company-wide DSI can hide operational problems. A retailer may have healthy overall inventory while one category or one store is carrying far too much stock. Calculate the metric at more detailed levels when the data supports it.

DSI and seasonality

DSI can rise before a known peak season because the business deliberately builds inventory. Compare the metric with similar periods and planned inventory strategy rather than assuming every increase is negative.

Because longer holding periods can increase the cost of keeping stock, review DSI alongside inventory carrying cost.

How Stash fits

Stash helps operators understand inventory across products and locations while connecting purchasing, forecasting, suppliers, and stock visibility. That can help identify where inventory is moving slowly and where purchasing decisions need adjustment.

Frequently asked questions

Is lower DSI always better?

No. Extremely low DSI can mean the business is understocked and vulnerable to stockouts.

Should DSI use revenue?

The standard formula uses COGS because inventory is measured at cost.