Home
Back
Months Supply Formula:
| From: | To: |
The Months Supply Inventory Formula calculates how long current inventory will last based on current sales rates. It's a key metric in inventory management that helps businesses optimize stock levels and avoid overstocking or stockouts.
The calculator uses the Months Supply formula:
Where:
Explanation: This formula divides the total inventory by the average monthly sales rate to determine how many months the current inventory will last at the current sales pace.
Details: Calculating months supply helps businesses maintain optimal inventory levels, reduce carrying costs, improve cash flow, and ensure product availability. It's crucial for inventory planning, purchasing decisions, and supply chain management.
Tips: Enter current inventory in units and average monthly sales in units per month. Both values must be positive numbers. The calculator will compute how many months your current inventory will last.
Q1: What is a good months supply value?
A: Ideal months supply varies by industry, but typically 1-3 months is considered optimal for most businesses. High-value items may have lower targets, while seasonal products may require higher inventory.
Q2: How often should I calculate months supply?
A: Monthly calculation is recommended for most businesses, but high-turnover industries may benefit from weekly calculations.
Q3: What if my sales are seasonal?
A: For seasonal businesses, use historical data to calculate average monthly sales or calculate separate months supply for peak and off-peak seasons.
Q4: Should I include backorders in inventory?
A: Typically, only physical inventory on hand is used. Backorders and in-transit inventory are usually excluded from this calculation.
Q5: How does this relate to inventory turnover?
A: Months supply is the inverse of inventory turnover rate. A 3-month supply equals 4 inventory turns per year (12 ÷ 3 = 4).