Managing inventory effectively is crucial for any retail operation, and one of the key metrics used to achieve this is Weeks of Supply (WOS). WOS is a measure of how long current inventory will last based on projected sales, providing valuable insight into stock levels and helping to prevent both overstocking and stockouts. That’s why knowing what WOS is, is very important. Because of that, in this blog, the concept of WOS will be explained along with its significance and we will provide clear, actionable methods for calculating it.
What is WOS (Weeks of Supply)?
Weeks of Supply (WOS) is a crucial metric in inventory management, representing the number of weeks that current inventory will last, given the average sales rate. The formula to calculate WOS is relatively straightforward: divide the current inventory level by the average weekly sales. For example, if a retailer has 500 units of a product in stock and sells 100 units per week on average, the WOS for that product would be 5 weeks. This metric allows retailers to gauge how long their stock will suffice before they need to replenish it, enabling more strategic planning and efficient resource allocation.
Weeks of Supply formula
To calculate Weeks of Supply (WOS), use the formula:
Weeks of Supply=Weekly Sales / Current Inventory​
This formula helps you with how to calculate weeks of supply and determine how many weeks your current inventory will last based on your weekly sales rate.
Example Calculation
Let’s walk through an example to illustrate the calculation:
- Determine Current Inventory: Suppose you have 1,000 units in stock.
- Calculate Weekly Sales: Assume your weekly sales are 250 units.
Using the WOS formula:
1000 units / 250 units per week = 4 weeks of supply
So, you have 4 weeks of supply based on your current inventory and sales rate.
The importance of WOS in retail cannot be overstated, but the figure can change rapidly. By providing a clear picture of how long inventory will last, WOS helps retailers avoid both overstocking and stockouts. Overstocking ties up capital in unsold goods, increases storage costs, and may lead to markdowns if the products become obsolete or out of season. On the other hand, stockouts can result in missed sales opportunities, disappointed customers, and potential loss of business to competitors.
Tools and Techniques
Managing Weeks of Supply manually can be complex, especially as your business scales. Tools like WAIR’s AI Replenisher can streamline this process. Our AI Replenisher uses advanced algorithms to continuously monitor sales patterns and adjust inventory levels, ensuring optimal stock levels and reducing the risk of overstocking or stockouts. So when sales fluctuate, we make sure you have the right stock in the right stores.
Case Study
To see this in action, consider the case study of a retail company utilizing WAIR’s solutions. According to the report, a retailer implemented WAIR’s AI Replenisher and saw a significant improvement in inventory management. The company called Shoeby which is a Dutch retailer with many stores even managed to get almost 3% in increased revenue after the implementation of WAIR’s replenisher which uses metrics like WOS within the algorithm.
Understanding Days of Supply
Days of Supply (DOS) is another metric that might not be visible but is used within the WAIR algorithm, which measures the number of days current inventory will last based on average daily sales. Similar to Weeks of Supply (WOS), DOS provides insight into stock levels but on a shorter time frame. The formula for calculating DOS is straightforward: divide the current inventory by the average daily sales this time. For example, if a retailer has 1,000 units of a product and sells 50 units per day on average, the DOS for that product would be 20 days. DOS is particularly useful for managing fast-moving items and short-term inventory needs.
Days of Supply formula
For Days of Supply calculation (DOS), use the formula:
Days of supply = current inventory / daily sales
This formula helps you determine how to calculate days of supply and how many days your current inventory will last based on your daily sales rate.
Example Calculation
Let’s go through an example:
- Determine Current Inventory: Suppose you have 1,000 units in stock.
- Calculate Daily Sales: Assume your daily sales are 50 units.
Using the DOS formula:
1,000 units / 50 units per day = 20 days
So, you have 20 days of supply based on your current inventory and sales rate.
The significance of DOS lies in its ability to offer a more granular view of inventory levels. While WOS provides a broader perspective over weeks, DOS allows retailers to make more immediate and precise adjustments to their inventory. This is crucial for managing high turnover products and responding quickly to changes in demand. For example, during a promotional event or peak shopping season, understanding DOS can help retailers ensure they have enough stock to meet increased demand without overcommitting resources to long-term inventory.
Conclusion
Understanding and accurately calculating Weeks of Supply (WOS) and Days of Supply (DOS) is essential for effective inventory management, helping businesses maintain optimal stock levels and avoid costly overstock or stockouts. The integration of AI technology is revolutionizing inventory management by providing precise, real-time data and automated adjustments. To take advantage of these advanced solutions, explore WAIR’s AI Replenisher and AI Redistributor. For more information about how this is applied in practice, learn about the AI Replenisher and the AI Redistributor.
