Weeks of Supply Calculator

What the formula says

Weeks of supply is inventory on hand divided by average weekly demand. It is the same measurement as stock coverage, expressed in the unit most retail and wholesale businesses plan in.

The forward-looking version divides by forecast weekly demand rather than trailing average, and for anything with a season or a trend, that is the only version that answers the question being asked.

The numbers, worked through

174 units on hand at 40 a week is 4.35 weeks of supply. Including 280 on order, 11.35 weeks.

Now apply a forecast. If the next eight weeks are expected to run at 55 a week because of a seasonal lift, the forward weeks of supply on hand is 174 ÷ 55 = 3.2 weeks, still above the three-week lead time, but only just.

The trailing figure said 4.35 and the forward figure says 3.2. The order that looked like it could wait a fortnight needs placing this week, and only the forecast-based version showed it.

What the number leaves out

Averaging weekly demand across a period containing a promotion or a stockout distorts the denominator in both directions. A week with no stock records low demand, which lowers the average, which raises the apparent weeks of supply on a product that is actually selling faster than the number suggests.

It also says nothing about whether the stock is in the right place. Twelve weeks of supply split across three warehouses with the demand concentrated at one of them is not twelve weeks of supply anywhere that matters.

Turning it into a decision

Use demand rather than sales in the denominator where you can reconstruct it. Sales during a stockout understate demand, and correcting for known out-of-stock periods produces a materially different, and more useful, number.

Set upper and lower thresholds rather than a single target. Below the lower bound is a buying action; above the upper bound is a markdown or transfer action, and the middle needs no attention at all.

Planning a season in weeks of supply

Retail planning conventionally runs on weeks of supply because it makes the season's shape visible. A twelve-week season needs stock to peak early, run down steadily, and land near zero at the end, and the weeks-of-supply curve shows whether it is on that path.

The rule of thumb is that weeks of supply should roughly track the weeks remaining in the season. Six weeks in with six weeks of supply left is on plan; six weeks in with fourteen weeks of supply is a markdown coming, and six weeks in with two is a lost sale coming.

Plotting the two lines together, weeks of supply against weeks remaining, turns a stock report into a season forecast, and it is the view that lets buyers act in week five rather than week eleven. The information difference between those two moments is small; the money difference is not.

Worth adding: comparing weeks of supply across locations makes transfer decisions obvious. A product showing two weeks at one site and eighteen at another does not need ordering, it needs moving, and the cost of a transfer is almost always lower than the cost of buying more.

That comparison is only meaningful when the demand denominators are each site's own. Dividing total stock by total demand hides the imbalance completely, which is exactly how businesses end up ordering stock they already own.