Inventory management relies on effectively balancing supply with demand. One crucial metric for achieving this balance involves determining the duration an existing inventory can satisfy anticipated demand. This duration, often expressed in weeks, provides valuable insights into potential stockouts or overstock situations. For example, if a company has 10,000 units of a product in stock and expects to sell 2,000 units per week, the available supply would theoretically last for five weeks.
Accurate projection of this duration is essential for several business functions. It informs procurement decisions, enabling companies to order the correct quantity of materials at the right time, minimizing storage costs and reducing the risk of obsolete inventory. Furthermore, it plays a critical role in financial planning, providing insights for revenue forecasting and budget allocation. Historically, this metric has evolved alongside advancements in inventory management techniques, transitioning from manual calculations to sophisticated software-driven analyses. This evolution reflects the increasing complexity of supply chains and the growing need for precise inventory control.
