Have you ever heard of Average Days in Inventory (ADI) and wondered what it means? It’s actually a very important formula for businesses, as it predicts the average number of days it will take to go through a store’s inventory. In essence, this formula shows how efficiently companies are managing their stock levels.
To calculate ADI, all you need to do is divide your number of inventory days by the cost of goods sold on a given period. For example, if your total cost of goods sold in a 30-day period was $3,000 and your total number of inventory days was 10, then your ADI would be 3.33 days.
This information can be used by businesses to manage stock levels and anticipate when products are likely to sell out or run low in inventory. By keeping track of ADI, companies can adjust ordering patterns and avoid costly overstocks or stockouts.