Days of cover: formula, example and how to use it

What is days of cover?

Days of cover is how long the stock you hold, plus what is already on order, will last if demand matches the forecast. It turns a stock number into time, which is what purchasing decisions are really about.

Days of cover formula

Here is how to calculate days of cover for one item:

Days of cover = (stock on hand + stock on order) ÷ forecast daily demand

Some teams leave stock on order out to see only what is physically there, so say which version you report. Divide by 7 for weeks of cover, the figure many retailers plan in.

A days of cover example

You hold 600 units, another 400 are on order and the forecast is 50 units a day. Days of cover is (600 + 400) ÷ 50 = 20 days. If the supplier’s lead time is 25 days, you will run short before a new order could arrive, so it should already have been placed.

Days of cover vs days of inventory

Days of cover looks forward, using forecast demand for one item. Days of inventory outstanding is a finance measure that looks back: average inventory value divided by cost of goods sold, times 365. One tells a buyer when to order; the other tells a finance team how much cash is tied up in stock.

Using days of cover

Compare each item’s cover with its lead time plus a margin and you have a ranked list of what to order first. Smart Inventory Forecasting’s stockout radar does this across every SKU, ranking what runs dry first with projected stockout dates.