What is the Meaning of a Particular Value of Days Inventory Outstanding (DIO)?

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Days Inventory Outstanding > Forum > What is the Meaning of a Particular Value of Days Inventory Outstanding (DIO)?

What is the Meaning of a Particular Value of Days Inventory Outstanding (DIO)?
shishpal singh, Manager, India, Member
I would like to know: if my DIO is 40.5 then what can be interpreted from this? Is this good, bad, poor or do I need some contigency plan?
 

 
The Meaning of X Days of Inventory Outstanding
Sureet, Manager, India, Member
A DIO of 40,5 days simply means you are able to turn over or sell your average inventory in that number of days.
Whether the figure of 40.5 is good or bad depends on the benchmark for the industry you operate in. Here you need to compare your figure with that of the industry leader to get a rough idea if your figure is good or not. However, figures are strictly not comparable due to different strategies being pursued by the companies; a comparison serves to give only an indication.
 

 
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.
 

 
Days Inventory Outstanding Benchmarking
al moran, CEO, United States, Member
 

     

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