Stock Coverage Calculator

What the formula says

Stock coverage is how long current stock will last: units on hand ÷ demand per period. Expressed in weeks it is the figure most buying decisions are actually made on, because it answers the only question that matters at the point of ordering.

Coverage including stock on order is the more useful version: (on hand + on order) ÷ weekly demand. That is the figure to compare against lead time, since stock already in transit counts toward covering the gap.

Worked through

174 units on hand against 40 a week is 4.35 weeks of coverage. With a three-week lead time, that leaves 1.35 weeks of margin, the safety stock, viewed in time.

Add 280 units on order and coverage rises to 454 ÷ 40 = 11.35 weeks, which is the full cycle: three weeks until the delivery lands plus the roughly seven weeks the order quantity covers.

Now a demand shift. If weekly sales rise to 65, the on-hand coverage falls from 4.35 weeks to 2.7, below the lead time, and the order that seemed comfortable now arrives after the shelf is empty.

Where the figure deceives

It uses average demand, and coverage matters most exactly when demand is not average. Four weeks of coverage going into a promotion or a seasonal peak may be four days of real coverage, and the calculation gives no warning.

It also treats all units as sellable. Coverage that includes damaged stock, allocated stock, or units in the wrong location overstates what is actually available, and the gap shows up as a stockout with stock apparently on hand.

Acting on it

Set a target coverage per product equal to lead time plus review period plus safety, and report against it weekly. Products below target need ordering, products far above it need investigating, and the report writes itself.

For anything seasonal, calculate coverage against forecast demand rather than trailing average. The trailing figure is most wrong precisely when the decision matters most.

Coverage as the buying report

A weekly report sorted by coverage ascending is the most useful single document in a stock-holding business. The top of the list is what to order now, and the bottom is where the capital is trapped.

It works better than a reorder point alert for one reason: it shows the whole distribution rather than only the items that have crossed a threshold. A product at 3.2 weeks of coverage against a three-week lead time has not triggered anything and is about to become urgent, and only the ranked view makes that visible.

The other end of the list is equally useful and far less examined. Products showing forty weeks of coverage are carrying capital that could fund the products at the top, and the conversation about moving that money is much easier to have when both ends are on the same page.

One refinement worth making to the report: weight it by value. Sorting purely by coverage puts a $2 accessory at the top alongside a $180 product, and the two need very different responses.

Adding a column of coverage multiplied by inventory value turns the list into a ranking by capital at risk, which is a better ordering for the weekly conversation. The low-coverage cheap items still need ordering, but they are not what anyone should be spending their thinking time on.