Meaning of X Days Inventory Outstanding
Jaap de Jonge, Management Consultant, Netherlands
I agree with Sureet about competitive benchmarking.
- Consider also that having inventory costs money, because it occupies money that otherwise could be used elsewhere (for example put it on a bank account and receive interest).
- The sector you're in is relevant too. For example if you are running a fresh food chain, the meaning of DIO is bigger.
- And also your strategy. For example when you aim to be a cost leader, the meaning of DIO is bigger.
- In general, of course, the lower a firm's Days Inventory Outstanding, the better.