Imagine your inventory is running thin, and you’ve placed a reorder. But the shipment is delayed because bad weather disrupts transportation.

You’re left unsure whether the new inventory will arrive before your current inventory runs out.

The pressure mounts as you try to meet customer demand. 

What do you do? You feel utterly helpless.

Calculating weeks of supply can relieve the stress of managing inventory. This simple metric clearly explains your current stock situation and how long it will last.

It provides a clear picture of your current stock and supports better forecasting and inventory strategies. In this quick guide, we’ll explore the concept of weeks of supply, its importance, and why mastering it is vital to effective inventory management.

A quick overview of Weeks of Supply (WOS)

Weeks of supply (WOS) is a critical metric that shows how long your inventory will last based on your current sales rate. It helps businesses determine if they have enough stock to meet demand without overordering.

For example, if you have 100 units and sell 20 units per week, your WOS would be five weeks. This metric lets you plan when and how much to reorder, keeping inventory in check.

Relevance of weeks of supply in inventory management

The weeks of supply metric is essential for maintaining balanced inventory levels. It helps businesses avoid overstocking and understocking, ensuring supply meets demand. 

Accurate sales data is crucial when calculating WOS. Ignoring aspects like stockouts can result in underestimating demand, leading to inventory shortages or excess inventory. Both situations can negatively impact profitability. 

Importance of calculating weeks of supply accurately

Correctly assessing weeks of supply helps organizations refine their inventory decisions, resulting in improved outcomes both now and in the future. It allows companies to optimize stock levels, reduce inefficiencies, and manage demand better.

1. Avoid stockouts

Knowing exactly how long your inventory will last can help you avoid running out of stock and consistently meet customer demand.

2. Improve supplier relationships

Planning with accurate WOS calculations ensures smoother communication with suppliers, fostering trust and reliability in the long run.

3. Optimize seasonal and evergreen inventory

Seasonal products need careful management to avoid overstocking or understocking. Manage seasonal inventory to lower WOS and evergreen to higher WOS. The metric helps balance the demand for both seasonal and evergreen items.

4. Minimize excess inventory

Determining WOS prevents over-ordering, reduces storage costs, and limits spoilage or obsolescence.

5. Enhance future planning

WOS enables better forecasting, helping you anticipate future demand and adjust your purchasing strategy accordingly.

6. Manage working capital

By calculating WOS, businesses can avoid tying up excess capital in inventory, improving cash flow for other operations.

7. Reduce spoilage

WOS calculations enable you to order smaller, more frequent quantities—minimizing the risk of products sitting idle and deteriorating.

8. Cut operational costs

When inventory levels are under control, operational costs decrease as you avoid panic buys and urgent restocks.

Formulas to calculate WOS with examples

In ecommerce, tight control over your inventory keeps those profit margins strong. 

What is the best way to calculate weeks of supply? Let’s take a look.

There are two main approaches: one using historical data and the other using forecasted demand.

1. Weeks of supply formula

WOS helps determine how long current inventory will last based on past sales.

Formula:

WOS = On-hand Inventory / Average Weekly Units Sold

Let’s understand this better with an example:

Imagine a small company that sells hilarious men’s shorts. Currently, they have 400 pairs of shorts in stock. Historically, they sell around 80 shorts weekly.

WOS = 400 units / 80 units per week = 5 weeks

Based on past sales patterns, the stock will last five weeks.

2. Forward weeks of supply (FWOS) formula

FWOS uses projected demand to estimate how long stock will last, factoring in future growth and seasonal trends.

Formula:

FWOS = On-hand Inventory / Average Forecasted Weekly Sales

Again, consider this hilarious shorts brand about to launch a marketing campaign. During the promotion, they expect weekly sales to increase to 150 units. The brand currently has 600 units in stock.

FWOS = 600 units / 150 forecasted units per week = 4 weeks

With the projected sales increase, they have only four weeks of stock left.

WOS vs. FWOS

While WOS is useful for steady sales, FWOS is more accurate for fluctuating demand. Both methods ensure efficient inventory management, helping companies avoid costly stockouts or overstocking.

By regularly using these formulas, businesses can better plan inventory orders and reduce risks, keeping their operations lean and responsive.

How to set a WOS target

As a best practice, we recommend you calculate WOS at the following levels:

• Aggregate level: Consider the entire inventory (e.g., all shorts).
• Category level: Divide by product category (e.g., athletic shorts, casual shorts, and swim shorts).
• SKU level: To enhance planning accuracy, drill down to each SKU.

Moreover, setting weeks of supply targets requires aligning inventory with anticipated demand to ensure optimal stock levels.

Start by analyzing historical sales data and forecasting future demand based on trends and seasonality.

Adjust your WOS target if your sales history shows increased demand during peak seasons.

Next, determine your WOS target by using the formula.

If your analysis suggests a 6-week supply is needed to prevent stockouts, use this as your guideline for inventory management. Regularly update this target to keep pace with changing market conditions.

Always factor in lead times from suppliers when setting your WOS target.

If replenishment takes two weeks, ensure your WOS accounts for this delay. 

WOS vs. Turn

Like WOS, Turn is a crucial metric for inventory management. Turn measures how quickly inventory is sold and replenished, while WOS indicates how long current stock will last.

Using the formula WOS = 1/Turn, you can convert Turn targets into WOS targets, helping to align your inventory levels with sales goals.

Adjust your WOS accordingly to ensure your inventory strategy meets Turn targets. Take time to review industry benchmarks, as they can offer insights into average Turn rates and corresponding WOS targets and guide you in setting effective inventory goals.

Limitations of the WOS calculation

WOS provides valuable inventory insights, but it has some limitations. It mainly relies on past sales data, which may only sometimes align with future demand.

Other limitations include:

• Lack of trend consideration: The method does not factor in emerging trends or promotions that could affect demand—potentially leading to miscalculations.
• Overlooks lead time variability: Variations in lead times from suppliers are only sometimes included, which can cause inaccuracies in stock-level predictions.
• Uses average sales figures: By relying on average sales, WOS may not capture unexpected demand spikes or drops, affecting inventory accuracy.
• Seasonal fluctuations: WOS often fails to adjust for seasonal demand variations, which can result in either surpluses or shortages during peak periods.

Optimize inventory replenishment with these seven tips

Efficient inventory replenishment is critical to smooth operations and meeting customer needs. Enhancing stock management can prevent overstocking, reduce costs, and ensure that products are always available when needed.

Here are seven tips to enhance your inventory replenishment:

1. Refine reorder points

Set reorder points based on up-to-date sales data and inventory levels. Adjust these thresholds regularly to align with changes in demand and prevent stockouts or excess inventory.

2. Utilize safety stock

Keep a reserve of safety stock to handle unexpected demand spikes or supply chain disruptions. This reserve ensures you have enough inventory to cover unforeseen variations.

As Kyle Hency, CEO of GoodDay, puts it, “Apply a strategy where you invest in seasonal styles with four weeks of supply and ensure evergreen styles always have ten weeks of inventory on hand.”

3. Leverage demand forecasting

Employ forecasting tools to predict future demand better. Club historical sales data with market trends and seasonal patterns to make informed replenishment decisions.

4. Monitor inventory turnover

Track how quickly your inventory sells to assess your stock movement. High turnover rates indicate effective inventory management, while low rates may suggest overstocking issues.

5. Adopt modern ERP software

Managing inventory adjustments manually is cumbersome—opt for a modern ERP solution to streamline the process and reduce errors.

Implement advanced ERP systems like GoodDay to automate inventory tracking and replenishment. Modern ERP solutions offer real-time insights, streamline ordering processes, and help manage inventory more effectively.

6. Improve supplier collaboration

Regularly communicate with suppliers to stay updated on lead times and potential delays. Building strong supplier relationships can lead to better terms and more reliable stock replenishment.

7. Conduct regular inventory audits

Perform frequent inventory checks to ensure accuracy and spot discrepancies early. Regular audits help maintain accurate inventory records and reduce the risk of overstocking or stockouts.

⚡Pro tip: To ensure accurate planning and forecasting, calculate WOS at three levels—aggregate (all inventory), product categories, and individual SKUs—for maximum visibility.

FAQs

1. What do you mean by weeks of supply in safety stock?

Weeks of supply in safety stock refers to the number of weeks the stock will cover based on current inventory levels and demand. It helps determine how long your safety stock will last during unexpected demand or supply chain disruptions.

2. How do you calculate weeks of on-hand inventory?

To calculate weeks of on-hand inventory, divide the current inventory level by the average weekly usage. This provides the number of weeks your current stock will last before needing replenishment.

3. What is “days of supply”?

Days of supply refers to the number of days a business can continue to fulfill customer demand with the current inventory levels. It helps determine how long stock will last before needing to be replenished. 

4. Should weeks of supply be high or low?

Here’s the secret: Weeks of supply should be balanced. A low value means you risk running out of stock, while a high value could indicate overstocking. The ideal number depends on your demand patterns, lead times, and storage capacity. Keeping it optimized helps avoid shortages or excess inventory.

Boost your inventory management game with GoodDay

Now that you understand weeks of supply—its definition, significance, and target-setting strategies—you can manage your inventory effectively. 

GoodDay’s ERP system can streamline this process for you. By offering real-time insights and simplifying WOS management, GoodDay ensures your inventory stays optimized and your operations run smoothly.