In the cutthroat game of e-commerce, it’s all about keeping costs down and margins up.
To avoid costly stockouts and capital-intensive overstocks, you need just the right amount of inventory on hand. That’s where critical calculations like Weeks of Supply (WOS) enter the picture.
Weeks of Supply is a key inventory planning metric that measures the number of weeks it will take to sell the inventory you’re currently carrying, including any buffer stock.
In this post, we’ll share steps to help you calculate your WOS, reveal how this metric compares to other inventory management KPIs, and provide practical tips to help you maximize your inventory efficiency using the WOS formula.
What is the Weeks of Supply formula?
Weeks of Supply (WOS) is an inventory metric that measures how long it will take to sell through the current on-hand inventory for a specific product, including buffer or safety stock.
By calculating Weeks of Supply, you can understand how much time (in weeks) is left before your next purchase order needs to arrive.
How to calculate Weeks of Supply
To calculate Weeks of Supply, use the following formula:
Current Inventory / Average Weekly Units Sold = Weeks of Supply
To understand how to use this formula, let’s look at Crynkle, a high-end stationary company selling a unique collection of vegan leather-bound notebooks and stationery products. Its most popular SKU is Shadoë, a personal growth journal with writing prompts for self-discovery.
Crynkle sells an average of 1,000 of Shadoë journals a week, based on historical sales data. It’s currently holding about 10,000 of these journals in stock, including buffer (a.k.a. safety or emergency) stock.
To calculate Weeks of Supply, Crynkle would run the following calculation:
10,000 / 1,000 = 10
Now we can see that Crynkle has 10 Weeks of Supply of Shadoë journals remaining.
In other words, it will take Crynkle 10 weeks to sell through all the Shadoë journals it currently has on hand. That means its next purchase order needs to arrive before then, in order to avoid stockouts or backorders.
But Crynkle also doesn’t want its next batch of journals to arrive too soon, or it could face extra storage fees, or risk carrying dead stock if the product loses popularity within the next ten weeks.
Leaders at Crynkle can use Weeks of Supply to find the right balance in order to replenish just in time.
Weeks of Supply (WOS) vs. Forward Weeks of Supply (FWOS)
One shortcoming of Weeks of Supply is that it’s based only on historical sales data. It doesn’t project for seasonality or future increases in demand.
That’s where Forward Weeks of Supply (FWOS) comes in.
Unlike WOS, FWOS uses forecasted average weekly sales, as estimated based on seasonal trends, potential market fluctuations, and other powerful contextual data.
To calculate FWOS, you first need to generate your demand forecasts to find your average forecasted weekly sales for a specific product.
Next, you’ll want to plug that projected figure into the following formula:
Current Inventory / Average Forecasted Weekly Sales = Forward Weeks of Supply
To better understand FWOS, imagine Crynkle is planning a new social media promotion for Shadoë. In partnership with a few key nano- and micro-influencers, the company will host live journaling events where followers can share their personal writing with others.
Shadoë customers will also be invited to share user-generated content, under the hashtag #MeAndMyShadoë, which the company will re-post to its page and stories.
Crynkle hopes the new campaign will spread and go viral, resulting in a major sales boost over the coming weeks. Forecasting data suggests that weekly sales will double to 2,000 journals per week.
To calculate FWOS, we’d run the following calculation:
10,000 / 2,000 = 5 Forward Weeks of Supply
Now Crynkle has just 5 Weeks of Supply remaining.
This means that, once the new promotion starts running, Crynkle will have about half as much time as usual before it needs its next purchase order to arrive.
The team at Crynkle will also need to make sure its suppliers can meet the increased demand, while taking into account any additional lead time and procurement challenges associated with the expected increase in order quantity.
What is Days of Stock?
At Flieber, we use Days of Stock (DOS), to help online retailers forecast with more precision. This metric determines how much inventory you have left down to the day, rather than week.
Like FWOS, Days of Stock also accounts for future demand, rather than just historical sales data, for a more accurate projection.
Depending on the inventory planning platform you’re using, you can use AI to detect seasonal trends, product variability and other anomalies for a DOS projection that covers all bases across your multichannel retail operation.
How WOS and FWOS can improve your inventory planning
Weeks of Supply and Forward Weeks of Supply are valuable KPIs for understanding whether or not you’re carrying healthy SKU levels across your product portfolio.
Let’s take a closer look at some of the ways WOS and FWOS can improve your inventory planning and add value to your business.
Maintain healthy inventory levels
The ability to maintain healthy inventory levels is critical to keeping costs low and customer satisfaction high. With accurate WOS and FWOS calculations, you’ll know exactly how much stock you need to satisfy customer demand without overstocking, amassing dead stock, or going out of stock.
Make smarter replenishment decisions
WOS and FWOS let you know exactly how much more stock you’ll need to reorder and when. With this knowledge, you can make purchase orders that satisfy your minimum order quantities (MOQs), without over-ordering. You may also be able to make smaller, more frequent orders, without the risk of running too low on inventory. If you find that your WOS or FWOS is higher than expected, you can use that information to delay or cancel existing purchase orders.
Improve supplier relationships
Better inventory management can help you manage your lead times on different products and avoid catching suppliers by surprise with last-minute demands. This can pave the way towards smoother supplier relationships, giving you more leverage to negotiate better rates and vendor contract terms.
Free up cash flow
Strong WOS and FWOS predictions can free up capital trapped in excess inventory and carrying costs. With accurate predictions of how much inventory you’ll need and when you’ll need it, you’ll be able to keep your storage costs down and stay compliant with key marketplace fulfillment guidelines, like Amazon’s FBA capacity limits. Accurate WOS and FWOS calculations can also help you save money by avoiding the hidden costs of stockouts, including having to coordinate backorders, expediting shipping, or managing customer complaints, refunds and churn.
Optimize your supply chain
Understanding your WOS and FWOS can help you spot areas of weakness in your supply chain, so you can make better choices for your business. Tracking your WOS and FWOS closely can help you pinpoint fluctuations in lead times that could be indicative of bigger issues in your business. Keeping a closer eye on your inventory can also help you spot inefficiencies in production, issues with your 3PL network, and more.
3 ways to improve your WOS calculations
Better WOS and FWOS calculations can help you streamline your inventory management and improve your bottom line. But where do you start?
Here are some ways to use WOS and FWOS more effectively:
1. Always use clean data
As the old saying goes: garbage in, garbage out. To get a more accurate reading on your WOS, FWOS, or any other inventory metric, you need clean data free of duplicates, errors, missing figures, or false signals. If you’re using Excel to forecast your sales and inventory, this may mean combing your historical data for common spreadsheet errors.
2. Consider all possible changes in demand
Accurate WOS and FWOS calculations should account for all kinds of potential fluctuations in demand. These include seasonal products and deviations, for example Q4 holiday sales or Amazon Prime Day, or extenuating circumstances, like anticipated changes in market conditions, weather, labor strikes, or geopolitical events.
3. Put your numbers in context
At the end of the day, Weeks of Supply is a singular data point. It can’t give you the full picture into the multitude of other factors that impact your sales and inventory levels, supply chain, or operations. Take time to calculate your Inventory to Sales Ratio, Inventory Turnover Ratio, and Sell-Through Rate for a more complete understanding of your retail operations.
Make better replenishment decisions with Flieber
WOS is a powerful tool for agile and effective inventory planning. But it’s just one metric.
When you’re ready to streamline demand level data across multiple brands and products, consider a customizable multichannel sales and inventory platform, like Flieber.
Flieber gives multichannel retailers deep visibility, right down to the SKU level. As you continue to add more layers to your business, Flieber will seamlessly integrate your sales and inventory data across all products and channels to help you make better replenishment decisions in a fraction of the time.
Make sure you have enough inventory, while continuing to grow your future sales.Get your free trial today and start making data-driven inventory decisions at scale.
